OMCOmnicom Group

In future filings, please discuss any material impact election spending may have on your financial performance and how this may be cyclical. In this regard, we note that on multiple occasions during your earnings call for the fiscal year ended December 31, 2017, your management stated on a couple of occasions that election spending was to have an impact on your financial performance.

Election spending is limited to our Public Relations (PR) discipline and has not historically been a significant revenue source for Omnicom. Revenue from election spending is primarily concentrated at one of our PR agencies that also provides services unrelated to election consulting including; brand positioning, corporate social impact and issue communications.

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Revenue from all sources provided by this agency accounted for less than 0.5% of Omnicom's revenue in each of 2017 and 2016.

While the decrease in election spending from 2016 to 2017 did impact the revenue growth in our PR discipline in North America, the impact of election spending was not material to Omnicom’s overall revenue or organic growth.

In future filings, we will add disclosure to address the impact of election spending, as well as other seasonal or cyclical factors that impact our financial performance if they are material.

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We note that you present organic growth by geographic region. In the case of North America, your largest geographic region, you experienced "modest" organic growth but did not discuss the offsetting factors. We understand from your recent earnings call that OMD account losses constrained your overall growth for three quarters of 2017 and “will probably for the first and possibly the second quarter" (of 2018).

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Additionally, a lot of your clients “over the course of the last five quarters have shiftedespecially in the United States … from a bundled way of purchasing to an unbundled methodology of purchasing." Please discuss significant trends and underlying factors driving or constraining organic growth where material to an understanding of consolidated information. Refer to Item 303A of Regulation S-K. 2. Revenue, page 6

While the focus of our filings is to disclose material trends, events or other factors that impact our financial performance, discussion on our earnings calls may include other items or events that occurred during the quarter. In future filings, we will expand our disclosure of significant trends and underlying factors that impact our revenue growth and financial performance to include relevant examples to assist in understanding the changes impacting organic growth and our financial performance.

2.

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Revenue, page 6

Background information related to Comments 3 through 6.

We believe that the following information relating to our contractual arrangements with our clients may be helpful to the Staff’s understanding of our response to Comments 3 through 6.

In substantially all our arrangements with clients, the legal and business terms, including representations, rights, responsibilities, indemnification, billing and payment procedures and terms, are covered by a Master Service Agreement (MSA). The MSA, however, often exceeds one year and rarely includes specific service deliverables or fee information. This information is typically contained in one or more separate Scope of Work (SOW) documents as addenda to the MSA. In many cases, we service our clients by having multiple agencies collaborate to deliver a client’s marketing communication objective. In these multidisciplinary engagements, although the services provided to the shared clients typically fall under the same MSA, each servicing agency typically negotiates a separate SOW related to its specific services to be delivered, including the terms and fees for the engagement. The fee is typically detailed by staff classification, on a rate per hour basis and includes an estimate for any third-party costs. Generally, the SOW can be for a single performance obligation which is typically for a relatively short period, for example a project that can take between 30 to 90 days, or up to one year for a more substantial effort likely involving more than one performance obligation which is often structured as a retainer contract. The accounting judgments made with respect to revenue recognition are affected by the terms of the MSA and the relevant SOW's, which collectively form the contract.

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We note your disclosure that certain fixed fee projects have a single performance obligation. Please clarify what services you have combined into this single performance obligation and what services you have treated as separate performance obligations. Reference ASC 606-10-25-21 and ASC 606-10-50-12 (c).

The performance obligation at the core of our services in fixed-fee arrangements is the ability to use our intellectual capital to create or develop a client’s marketing or corporate communications message, or content that can be delivered to a target audience across different communication mediums.

As described above, across our businesses, we have both short-term project contracts with clients, which normally take up to 90 days to complete, and long-term projects, which may take up to a year to complete. Our short-term projects normally consist of one SOW with one specific agency.

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In these arrangements, we typically integrate the underlying agency services (enumerated below) to complete the performance obligation and do not combine any performance obligations. In our long-term projects depending on the facts and circumstances (as described more fully below) we may conclude that the performance obligation is a stand-ready obligation in which we will combine similar performance obligations into a single performance obligation, or we may treat the performance obligations as distinct and use stand-alone selling prices to allocate the appropriate transaction price to each performance obligation.

The underlying services provided in the delivery of the performance obligations include:

Understanding a client’s brand and its selling proposition;

Developing a unique message to communicate the value of the brand to a target audience and managing the creative idea throughout the production process;

Using marketing technologies, whether through traditional means or emerging digital platforms, to analyze data and develop insights and creative solutions, which may or may not include media planning and buying; and

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Please help us better understand the nature of services transferred to your customers in your strategic media planning and buying business. Tell us which services you have combined with others for the purposes of determining your performance obligations and which services you have treated as a separate performance obligation.

Rest of the question

Please also clarify if and how services provided in this business relate to services provided under your fixed fee projects and retainer contracts. Reference ASC 606-10-25-21 and ASC 606-10-50-12 (c).

The services of our strategic media planning and buying agencies are provided in the same way as all our agencies: by use of the intellectual capital of our people, through consulting services, typically on a rate per hour basis, which leverages the skill sets and experience of our people. Historically, media planning and buying services were an integrated component of our creative services, and the available distribution channels were narrower at that time and thus the emphasis was on matching the message to the media selected.

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However, as the business has evolved and as media distribution channels proliferate, clients can tailor messages to more clearly differentiated audiences, matching the message and the media to the consumer. As a result, today we have separate and distinct strategic media planning and buying agencies and a substantial portion of our media revenue is delivered from these activities.

To be successful, our clients expect us to deliver the right message to the right (targeted) consumer at the right time. That message may be created and developed by one of our creative agencies, typically under a separate SOW, or by a third party. To be most effective at delivering the message, our strategic media planning and buying agencies, use our data and analytical platform and tools, to integrate their insights and ideas to create the media plan using information about the targeted audience and then execute the media plan, which includes management of the media buying process and analytical monitoring of the effectiveness of the selected media. Consistent with our conclusion regarding our response to Comment 3 above, we do not view the planning and buying services provided throughout this process as separate or distinct performance obligations. However, while the types of contracts that are typically employed in our strategic media planning and buying businesses are not different from our other businesses and similarly include fixed-fee and retainer arrangements that are based on a staffing plan and a rate per hour, we frequently have other arrangements.

The following are the typical arrangements with our clients in our media planning and buying agencies and our related performance obligations:

Fixed-Fee Arrangements

For fixed-fee short-term media planning and buying projects, the performance obligation is the integration of the underlying services of planning and buying, which in most cases occurs in very close proximity. More specifically, the individual components of these services do not meet the requirements of ASC 606 to be considered a separate performance obligation when considering the above factors of ASC 606-10-25-21. For fixed-fee long-term projects of up to a year that involve planning and buying for more than one advertising campaign, we believe both conditions of ASC 606-10-25-31 and 32 are satisfied to treat this type of engagement as a series of similar services and a single performance obligation as discussed above in our response to Comment 3.

Media Commission Arrangements

In certain markets a commission structure arrangement is used where our fees are based on a percentage of the client’s media spend. Since we are not paid unless the media is aired, we consider the airing of the media a constraint and we only record revenue when the media has been run. This results in each media planning and buying performance obligation being treated as a distinct service and revenue is recorded based on the stand-alone price (commission) derived from that media buy.

Multi-Discipline Arrangements

In some of our agencies, and in some of the markets we operate in, the creative and media services are included in the same fixed-fee contract. For these contracts we consider the two services (the creative services and the media planning and buying services) distinct performance obligations and allocate the fixed-fee to these separate services based on their stand-alone selling price as provided in the staffing plan in the contract.

Multi-Discipline Commission Arrangements

In certain markets or, for certain clients the creative and media services are included in the commission contract. For these contracts, we are not paid for either the creative or the media services unless the media is aired. Accordingly, we consider the airing of the media a constraint and we only record revenue when the media has been run. This results in each media planning and buying performance obligation being combined with the creative component, and revenue is recorded based on the stand-alone price (commission) derived from the media buy.

Hybrid Arrangements

Certain contracts with combined services (the creative services and media planning and buying services) incorporate a hybrid fixed-fee/commission structure, in which the fixed-fee is remuneration for the creative services, and the commission is remuneration for the media planning and buying services. For the creative services, we use the stand-alone selling price based on the fixed-fee and we derive the media fee based on the commission structure. Accordingly, we consider the airing of the media a constraint and we only record media revenue when the media has been run.

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Please tell us the nature of all third-party-costs you incur on behalf of your clients. Provide us with your analysis of how you determined whether you are acting as a principal or as an agent in these arrangements. Tell us how you considered your role in creating or developing a client’s marketing or corporate communications message.

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Please specifically address amounts paid to both media providers and production companies. Reference ASC 606-10-55-36 through 39 and ASC 606-10-50-12 (c).

Third-party costs incurred on behalf of our clients in the delivery of our services consist of direct costs and incidental, or out-of-pocket costs.

Direct costs incurred in connection with the creation and delivery of the advertising or marketing communication services consist of, among others:

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Purchased media (TV, radio, print, digital and outdoor);

Studio production services;

Promotional materials;

Marketing research services and third-party data;

Specialized talent, including artists and other freelance labor; and

Marketing event supplies and materials.

Out-of-pocket costs

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consist of, among others:

Transportation (airfare, mileage, etc);

Hotel;

Meals;

Telecommunication charges; and

Miscellaneous office expenses.

Out-of-pocket costs that are reimbursed by clients are reported gross and included in revenue because we control the specified services prior to the transfer to the client.

For third-party direct costs, the assessment of whether revenue should be presented net of direct costs or gross including these costs depends on whether we are acting on our client’s behalf as an agent or as a principal, respectively. ASC 606 generally provides that we are acting as an agent when we arrange for the third-party costs to be incurred at the client's direction in connection with their advertising or marketing communication plan. Alternatively, we are considered to be acting as principal when we are responsible for directing and integrating third-party vendors to fulfill our performance obligation under the client contract. The most significant of our third-party costs are purchased media, studio production services and event marketing services and expenditures.

In accordance with ASC 606-10-55-39, the factors we consider in determining if we are acting as principal are:

Fulfillment Risk - whether we are primarily responsible for providing the goods or services to the customer.

Inventory Risk - whether we have inventory risk before the goods or services are delivered to the customer.

Pricing Risk - whether we have the discretion in setting the price to the customer of the specified goods or services purchased from a third-party, recognizing that an agent may also have discretion in setting prices in some cases.

Generally, we act as an agent when contracting for third-party services in our advertising, public relations and healthcare advertising businesses. There is an established industry practice for media purchases as an agent or as a principal, as discussed below. Studio production services are almost always purchased on behalf of clients acting as an agent under the ASC 606 model and applying the factors above. The basis for our conclusion that we are an agent when arranging third-party production services, and that we are an agent for media services, is that our contracts typically include remuneration for our services: (a) to act as a consultant in the production of the commercial, or other marketing communications, and (b) to create the media plan approved by the client and execute the related buying effort. Further, these contracts require that the services for production and media be approved by the client in advance and we are obligated to disclose the actual cost of the services (e.g., there is no inventory risk or pricing risk or opportunity available to us) and the production and media vendors know who the underlying client is. Accordingly, we concluded that we do not control the production or media prior to the transfer to the client and the above indicators for fulfillment risk, inventory risk or pricing risk are not met and, we are therefore, acting as an agent and procuring these services on behalf of our clients.

We typically act as principal when contracting for third-party services on behalf of our clients in our Events, Field Marketing and certain Specialty Marketing businesses within our CRM disciplines, as well as certain media buying efforts.

In our CRM businesses where we act as principal, we are responsible for fulfillment and we take pricing risk. These arrangements are typically fixed-fee contracts including third-party costs which are contracted directly for by the agency from vendors. The agency is also responsible for the integration of the vendor services into the final marketing event or solution at the agreed-upon price. For example, in our events businesses, when we act as a principal, we typically quote one combined fixed-fee that includes all the components of the event, including the creative concept for the event (e.g., a new product launch), promotional items, entertainment and specialized freelance labor (e.g., talent that has specialized knowledge of the product). We are responsible to contract directly with third-party vendors and to deliver the event at the agreed-on price. As a result, we take fulfillment and pricing risk and therefore, we conclude that we are acting as a principal in these arrangements.

The key difference in our media planning and buying business when we are acting as principal versus agent is that in the principal arrangement the actual price of the media is not disclosed to the client and although the client opts into this non-disclosed cost model, the client does not approve the media purchased from the vendor. The typical arrangement in our principal-based media business provides that we will agree upon a fixed-fee with the client as the agency’s sole remuneration for the services to be provided, including the cost of the media and any data or other related costs. The media vendors contract directly with us and we are held accountable to meet the requirements established in our client contract. As a result, we have a fulfillment obligation and we take pricing risk in that the profitability of the contract is based on the amount by which the fixed-fee exceeds the cost of the media which is purchased at our discretion. We therefore conclude that we are acting as principal in these arrangements.

In future filings, in accordance with ASC 606-10-50-12(c), we will include disclosures which detail the types of costs incurred on behalf of our clients.

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We note your disclosure that for certain retainer contracts you recognize revenue on a straight-line basis. Please tell us how you determined that your efforts are expended evenly throughout the performance period. Please specifically address what consideration you gave to seasonal patterns. Reference ASC 606-10-25-31 and ASC 606-10-50-18(b).

Rest of the question

We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures, notwithstanding any review, comments, action or absence of action by the staff.

With respect to fixed-fee contracts that are structured as monthly retainers, as described in our response to Comment 3, we have a stand-ready obligation to perform services on an ongoing basis over the life of the contract, typically for periods of up to a year. The scope of these engagements is broad (e.g., production of a set number of major campaigns over the year) and they generally are structured with no significant gaps in performing the service during the contract period. Typically, the contract provides for a dedicated team to be assigned to the client during the contractual period.

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The staffing plan describes and identifies the dedicated team assigned to the client in terms of "full time equivalent" employees. A full time equivalent is a measure of each individual's full year commitment to the client, often delineated by name, title and department. Therefore, these services are substantially fixed and incurred evenly over the contract term. The staffing plan is an estimate of the effort to fulfill the performance obligations rather than providing a detailed time line or schedule.

In practice, the underlying activities could significantly vary within a day and from day to day. However, this is not relevant to the evaluation of the nature of the overall promise. Performance obligations are generally deemed met upon client satisfaction. For example, in contracts that include production of a television, print, digital, or other “commercial spot,” the obligation to deliver the commercial spot is not necessarily just ours, but rather the performance obligation is to work with the client to understand their intended marketing outcome, their underlying marketing issues, and how the creative solution should be expressed, including working with the third-party production company, if applicable, through completion of production.

As discussed in the Transition Resources Group (TRG) memo No. 39 para 15 - “Application of the series provision and allocation of variable consideration”, if the nature of the entity’s promise is the act of standing ready or providing a single service for a period of time, the evaluation would likely focus on whether each time increment, rather than the underlying activities, are distinct and substantially the same.

We believe that the pattern of benefit to the client, as well as our effort to fulfill the contract are generally the same throughout the period. The economics of these contracts, which are often based on a straight-line fee billing arrangement, align with the expectation that the services are provided continuously and ratably over the contract period and clients who have negotiated the terms of the arrangement support this assessment.

From time to time, there may be changes in the client service requirements during the term of the contract and the changes could be significant. These changes are typically treated as scope changes that usually result in a separate SOW covering the additional requirements and the associated costs, as well as additional fees for the incremental work to be performed.

Seasonal patterns are usually a result of client project business. While these projects may be connected to the effort of a retainer agreement, they typically are short-term in nature and are included in a separate SOW. Revenue from these projects is not recognized on a straight-line basis. Project based arrangements have become more prevalent in recent years. In future filings, we will add disclosure to address the impact of these factors and their impact on our financial performance if they are material.

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Revenue, page 6 1. We have reviewed your response to comment three. We note you have combined managing third-party service providers on behalf of clients to produce content or deliver media or production services with other services into a single performance obligation. Please provide us with a specific and comprehensive discussion of the nature of the activities involved in these management services.

Rest of the question

In addition, please clarify if you earn any commissions specific to these services. If so, please tell us when the associated revenue is recognized. Finally, please tell us how you considered the guidance related to variable consideration for a series. Reference ASC 606-10-32-40. 2. We have reviewed your response to comment four. We note in your commission arrangements you consider the airing of media a constraint and only record revenue when the media has been run. Please further explain why an estimate of variable consideration cannot be made in an earlier period. In addition, please reconcile your response to your disclosure on page 7 hereunder in which you state that commission revenue is recognized when it is probable that the media will be run. Reference ASC 606-10-32-5 through 14.

Linking “What We Do” to the Client Arrangements and Addressing the Accounting Literature and our Accounting Policy - Application of the Five Step Model

Step 1 - Identify the Contract

A.

A contract is an agreement that creates enforceable rights and obligations (ASC 606-1025-20).

The Master Services Agreement (MSA) is a customized agreement setting forth the terms and conditions under which the client may engage Omnicom for professional services.

Rest of the answer

The contracting entity in the vast majority of cases is the Lead Agency, or Agency Network and not Omnicom.

The Statement of Work (SOW) identifies the promised services to be transferred to the client, (Creative Advertising Services, or Strategic Media Planning and Buying Services in the examples previously provided to the Staff) and the specific fees, terms and conditions for the promised services.

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The MSA and SOW together represent the client contract and establish the enforceable rights and obligations of the parties.

Fees and the related level of Agency effort are included in the SOW as an appendix to the MSA.

The MSA and SOW are cancelable by either party on 90 days’ notice without penalty and all MSAs provide that the Agency is entitled to all fees for services performed through the cancellation date. The MSA and SOW do not contain cancellation penalties and terminations for convenience, though infrequent, can and do occur.

An SOW can be for short-term projects (90 days or less) or long-term assignments (up to one year).

Every SOW is separately negotiated with the client by the performing Agency and our Agencies execute and perform tens of thousands of SOWs per year.

A staffing plan, which is included in the SOW, translates the SOW into the agreed-upon level of effort by staff function needed to perform the requested services. As with other professional services firms, both the Agency and the client monitor the amount of time incurred against the staffing plan.

The Agency’s rate card is then applied to the forecasted aggregate hours by function from the staffing plan to arrive at the resulting fee.

Some client arrangements include performance incentives that can be both qualitative and quantitative.

In certain markets and on an infrequent basis, commission structures are used in client arrangements.

B.

Optional Services

Often services not contemplated in the original SOW are added at a later date. All optional services are a separate purchasing decision by the client.

A new and distinct SOW is prepared for the new services under the terms and conditions of the MSA and the additional services are priced at the standalone selling price (see Items E and F below).

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Optional purchases are therefore treated as a separate contract and not a contract modification for accounting purposes (discussed in item F below).

C.

Multi Agency Engagements

Clients often require services from more than one of our Agencies. In most cases, the services provided by each of our Agencies would be subject to the same MSA and a separate SOW is negotiated with the client by each performing Agency. [***].

D.

Multi Discipline Engagements

In a few businesses and markets, one Agency may perform several services (e.g.; creative and media). In such instances the SOW will include both services and a combined fee. However, the staffing plans included in the SOW will specifically identify the service disciplines involved; the result is effectively the same as having a separate SOW and fees for each service discipline; that is, each service is priced at its standalone selling price. In this case, the scope for each service discipline is based on the respective staffing plan. The scope for each service discipline is treated as a separate performance obligation and fees are allocated to each performance obligation based on the relative proportion of hours in each respective staffing plan (ASC 606-10-32 through 35).

E.

Combining Contracts - ASC 606-10-25-9

Two or more contracts entered into at or near the same time with the same customer shall be combined if one or more of the following criteria are met:

The contracts are negotiated as a package with a single commercial objective.

The consideration to be paid on one contract depends on the price or performance of the other contract.

The goods or services promised in the contracts are a single performance obligation (ASC-606-10-14 through 22).

In our multi-agency engagements, more than one Agency will provide services to the client. In most cases, each Agency will negotiate a separate SOW with the client. We concluded that we do not meet the criteria to combine the SOW of each Agency into a single contract because:

Each Agency negotiates a separate SOW for its services and the SOW is not negotiated as part of a package with another Agency.

The consideration paid to each Agency is separate and distinct and there are no pricing or performance interdependencies with any other Agency SOW.

The goods and services promised by each Agency are separate performance obligations. In a multi-agency arrangement, each Agency has its own functional discipline that is different from the other performing Agency.

F.

Contract Modifications - ASC 606-10-25-10 through 13

A contract modification is a change in the scope or price, or both in a contract. Contract modifications are treated as either a separate stand-alone contract or are combined with the original contract. A contract modification is accounted for as a separate contract if both the following conditions are met:

The scope of the contract increases because of additional goods and services that are distinct.

The price of the contract increases by an amount that reflects the stand-alone selling prices of the additional goods and services.

In circumstances where the client adds additional scope or new services reflecting services not contemplated in the original SOW, the Agency will execute a new SOW with the client. We concluded that in these instances, the new SOW is accounted for as a separate contract.

A contract modification that is not accounted for as a separate contract is accounted for as a change to the original contract. Infrequently, significant variations in the level of effort in a fixed fee contract may result in an adjustment, upward or downward, to the fee. In these cases, we concluded that these changes are a modification of the existing SOW. We account for this modification by updating the transaction price and recording a cumulative catch-up adjustment to revenue in accordance with ASC 606-10-25-13b.

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Step 2 - Identify the Performance Obligations

The performance obligations are the promised goods and services in the contract that will be transferred to the client (ASC 606-10-25-16).

The SOW is the agreed-upon level of effort expressed in FTEs and staff classification for the engagement. The promise to the client is the level of effort to provide and integrate the advisory and consulting services.

For Creative Advertising Services, the integration of the collective effort of the FTEs results in the execution of creative ideas that extend across the client’s marketing organization, brands and products including, incidental production efforts and output that are not distinct in the context of the contract (ASC 606-10-25-21).

The core of a creative assignment is to provide the client with a strategic marketing plan and creative idea that can be used throughout the client’s marketing and sales organization and across all types of media. Our engagements are highly collaborative with the client and the client is kept well-informed of progress-to-date. Therefore, the client is receiving and consuming our services as the SOW is completed. All output produced requires the integration of the Agency’s collective effort (i.e.; the marketing strategy and creative idea).

The SOW is a promise to provide advisory and consulting services at an agreed-upon level of effort by Agency personnel at an agreed-upon rate per hour to accomplish the entire assignment. [***].

The Agency may or may not be asked to provide advisory and consulting services related to the production of the commercial spots which is performed by third-party production companies. The MSA provides that the Agency will be compensated for the level of effort expended to date in the event of cancellation by the client, [***].

Other Considerations - Creative Services

The client is involved throughout the creative process.

[***].

The client may request Optional Services. Often production coordination services are an Optional Service that may or may not involve the Agency. Agency involvement in Optional Services results in a separate SOW (i.e., a separate contract), including out-of-pocket costs and pass-through costs. Pass-through costs are third-party vendor costs that are pre-approved by the client, coordinated by the Agency, and are required to be billed to the client without mark-up.

The client typically hires the services of a third-party cost consultant to oversee Agency and other third-party vendors (production companies, talent vendors, research companies, etc.).

For Strategic Media Planning and Buying Services, the incorporation of the collective level of effort of the FTEs results in a comprehensive media plan and the related execution of the plan through the buying process. The Strategic Media Planning and Buying services occur in close proximity throughout the contract period and are not individually distinct or separable in the context of the contract (ASC 606-10-25-21).

Strategic media planning and buying assignments involve the integration of a client’s marketing communications strategy with a media execution strategy designed to optimize its media investment (the money it spends with third-party media suppliers/owners to get its message to the consumer). The planning and buying components are not discrete as the process is dynamic and iterative, and in the case of digital media, the planning and buying can be modified in real time.

Similar to all our arrangements, the SOW is a promise to provide advisory and consulting and media buying execution services for an agreed-upon level of effort by Agency personnel at an established rate per hour to accomplish the entire assignment. At the time the SOW is prepared there isn’t a clear allocation of the client’s media budget.

In some markets, the fee structure in the SOW is based on a commission expressed as a percentage of the client’s total media expenditure.

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A media assignment can be short-term (90 days) or long-term (up to one year). For long term assignments the client’s media investment is made in tranches throughout the period and each tranche involves a planning and buying process, or phase, as they occur in close proximity. That is, it is not the case that the planning is done in the early phase and the buying is done in the later phase.

Other Considerations - Strategic Media Buying Services

Client establishes a rigid process that the Agency must follow prior to executing each media buy.

Estimate of costs for each media buy is made and provided to the client for approval through the use of insertion orders (IOs).

The Agency is acting as an agent for a disclosed principal (the client) in markets that recognize the agency relationship.

In other markets the Agency contracts with media vendors on a “pay when paid” basis, effectively disclosing to the vendor that the client is the principal in the transaction.

The Agency is required to bill the client at vendor cost.

The Agency’s fee for the buying effort is included in the SOW.

When media is bought by the client through an affiliated Agency, the client must agree to a separate or amended SOW that allows for media purchases by an affiliated Agency. The amount to be charged to the client by the affiliated Agency is approved by the client (and the actual cost of the media to the affiliated Agency is not required to be disclosed to the client), resulting in revenue to the affiliated Agency (see Principal vs Agent - Media Buying Services).

Step 2 - Summary

The SOW is the promised level of effort to the client in the form of a staffing plan and the related fee. The output of the contract is the Agency’s time and effort and integrates components from each staff function in the SOW. The client receives and consumes our services as we provide them. Therefore, we concluded that the unit of account for a performance obligation is the SOW - the promised level of effort for advisory and consulting services and the integration of these services to the client’s satisfaction. Alternatively, it could be viewed that the unit of account is the hours in the staffing plan that our Agencies provide to the client.

We also considered the factors in ASC 606-10-25-21 regarding when separate performance obligations are required.

The entity does not provide a significant service of integrating the goods or services with other goods or services promised in the contract into a bundle of goods or services that represent the combined output for which the client has contracted. In other words, the entity is not using the goods or services as an input to produce or deliver the combined output specified by the client.

The goods or services do not significantly modify or customize another good or service promised in the contract.

The good or service is not highly dependent on, or highly interrelated with, other goods or services promised in the contract. For example, the fact that a client could decide to not purchase the good or service without significantly affecting the other promised goods or services in the contract might indicate that the good or service is not highly dependent on, or highly interrelated with, those other promised goods or services.

In multi-discipline engagements with one SOW, which occurs infrequently, the scope for each service discipline is based on the respective staffing plan (effectively similar to having a separate SOW) and each is treated and accounted for as a separate performance obligation. Most clients’ engagements result in multiple SOWs as a result of optional services not contemplated in the original SOW. Each SOW represents a new arrangement with the client and accordingly we treat each as a separate performance obligation.

Step 3 - Determine the Transaction Price

The transaction price is specified at the SOW level (ASC 606-10-32-2). In most contracts the consideration is a fee for service. The fee can be expressed in three ways; (1) a fixed fee where the fee does not increase or decrease based on actual hours expended, (2) an arrangement where the fee can increase or decrease based on actual hours expended, and (3) a commission based on a percentage of the client’s total expenditures.

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Certain contracts may have variable consideration (ASC 606-10-32-6) in the form of performance-based bonuses or penalties, which is included in the transaction price and estimated based on our history with the client in accordance with ASC 606-1032-8 and 9.

Step 4 - Allocate the Transaction Price to the Performance Obligations

The transaction price is allocated to each performance obligation in an amount that depicts the consideration expected to be entitled for transferring the promised goods and services (ASC 606-10-32-28).

Since the unit of account is the SOW, or alternatively, the time and effort to be expended by our staff, the basis for the allocation of the transaction price is the staffing plan (ASC 606-10-25-21).

When using proportional revenue recognition, we effectively allocate the transaction price based on inputs. The level of effort input is equal to the hours incurred. We allocate the transaction price to the performance obligation based on the total projected level of effort by staff function.

In multi-discipline engagements with one SOW, which occurs infrequently, the scope for each service discipline is based on the respective staffing plan and each is treated and accounted for as a separate performance obligation. We allocate the transaction price to each of these performance obligations based on the relative proportion of hours and level of effort reflected in the staffing plan for each service discipline which reflects the relative selling price.

Step 5 - Recognize Revenue

Control is transferred over time and revenue is recognized over time as the client receives and consumes the benefits from our performance, or alternatively, if the company’s performance does not create an asset with an alternative use to the company and the company has an enforceable right to payment for performance completed to date (ASC 606-10-25-27(a) and (c)).

Our engagements are client-specific and highly collaborative and, typically the client receives and consumes the benefits from our performance as the SOW progresses. In addition, we do not create an asset with an alternative use to us, or by other clients of ours and our contracts provide for payment for all services performed to date in the event of cancellation.

In long-term fixed fee arrangements where the fee does not increase or decrease based on actual hours expended, we conclude we have a stand-ready obligation because we provide a constant level of similar services over the term of the contract (ASC 606-10-25-14). Accordingly, we recognize revenue on a straight-line basis (ASC 606-10-55-184 through 186).

For most other long-term contracts and our short-term projects with arrangements where the fee can increase or decrease based on actual hours expended, we recognize revenue by measuring the progress towards completion (proportional performance) using inputs/hours (ASC 606-10-25-31). When we recognize revenue over time, by using the proportional performance revenue recognition approach, we allocate the transaction price to the performance obligation based on the level of effort reflected in the staffing plan, adjusted for actual hours worked and hours expected to complete. Absent unusual terms, it effectively has the same result as if we identified separate performance obligations within the SOW (hours by staff function), rather than treating each SOW as the performance obligation.

For our commission-based contracts, revenue is recognized at a point in time (ASC 606-10-25-30). In an agreed-upon commission structure, we assume and accept the business risk that our performance obligation is not fulfilled until it is probable that the media will be run, including when it is not subject to cancellation by the client or the vendor.

While we have the obligation to provide certain services, we do not have the right to payment for services unless the client authorizes the individual media purchases by approving the insertion order and until it is probable that the media will be run, including when it is not subject to cancellation by the client or the vendor.

ASC 606-10-25-1(e) includes a probable assessment of collectability as one of the criteria that must be met to conclude that the contract with the customer is valid and enforceable.

OMNI 007

In a commission arrangement, collectability is only certain when the media has run, or is probable of being run because the cancellation period has lapsed; therefore, the Agency does not have an enforceable right to payment until that point.

In addition, when applying the constraint on revenue provision (ASC 606-1032-12), we are not permitted to recognize revenue until it is probable that the media will be run, including when it is not subject to cancellation by the client or the vendor, because that is the point in time when it will not result in a significant reversal of cumulative revenue recognized.

In certain commission-based contracts, the commission percentage we earn is tiered or scaled based on the total media expenditures by the client over the life of the contract. Although clients provide an estimate of their expected media expenditures over the term of the contract so that appropriate resources can be assigned, there is no contractual commitment made by the client that requires all or any of the media expenditure estimates to be met. In circumstances where the commission scale is applied on a cumulative basis over the contract period, we treat this as variable consideration and in accordance with ASC 606-10-32-5, we estimate the probable revenue amount based on the final tier or scale expected to be achieved during the contract period. And to determine the transaction price we apply the expected final percentage to each discrete media buy and revenue is recognized when it is probable that the media will be run, including when it is not subject to cancellation by the client or the vendor.

For contracts with both a fixed-fee and a commission component, the fixed-fee component is recognized over time. As the commission is tied to individual media purchases which require a separately approved insertion order by the client, these are considered to be optional purchases and a separate contract and performance obligation; accordingly, consistent with the discussion above, the commission component is recognized at a point in time.

For contracts with variable consideration in the form of performance-based bonuses or penalties, in accordance with ASC 606-10-32-5, we estimate the probable amount of revenue and it is recognized over time consistent with the pattern of revenue recognition for the underlying performance obligation.

Read in the reply ↗

We note your response to comment five. Please address the following items: • Quantify the significance of media purchases where you act as an agent and those where you act as a principal. • We note your assessment of indicators.

Rest of the question

Please provide us with a more specific and comprehensive discussion of how you considered the definition of control in your analysis and whether you are directing the use of the purchased media and studio production services. • Please discuss how you considered the use of your Annalect, Omni and Accuen platforms. • In order for us to better understand your analysis, please provide us with representative contracts and related invoices, if applicable, for your purchased media and studio

Linking “What We Do” to the Client Arrangement and Addressing the Accounting Literature and our Accounting Policy - Principal vs Agent

In providing goods and services to a customer, the company should determine whether the performance obligation is to provide the goods and services itself (principal) or arrange for the goods and services to be provided by another party (agent) (ASC 606-10-55-36).

To determine the nature of the promise, the company should (ASC 606-10-55-36A):

Identify the goods and services which could be provided by another party, and

Assess whether it controls (ASC

Rest of the answer

606-10-25-25) each good or service before they are transferred to the customer.

Primary indicators of control are (ASC 606-10-55-39):

The company is responsible for fulfilling the promise to provide the specified good or service.

The company has inventory risk before the good or service is transferred to the customer.

The company has discretion in establishing the price for the good or service. Establishing the price that the customer pays for the specified good or service may indicate that the entity can direct the use of that good or service and obtain substantially all the remaining benefits. However, an agent can have discretion in establishing prices in some cases. For example, an agent may have some flexibility in setting prices to generate additional revenue from its service of arranging for goods or services to be provided by other parties to customers.

Consideration of third-party production costs for inclusion in revenue as a principal. The MSA and SOW for Creative Advertising Services do not include a requirement for our Agency to produce or deliver a commercial/advertisement.

The initial SOW may or may not include FTEs in the staffing plan for us to perform coordination services related to the third-party effort. However, the decision to proceed with the production of a commercial and incur the associated costs, is made by the client at a later date and reflected in a separate SOW.

OMNI 008

If the client chooses to proceed, the production and delivery of the commercial/advertisement is covered by a separate SOW and treated as a separate contract and performance obligation. Our Agency will then provide coordination services to the client throughout the third-party production process.

The client requires a rigid process that requires that we present bids from third-party production companies to the client for approval of the winning bidder.

Once production begins, all costs are required to be billed to the client at the vendor cost without markup by the Agency.

All critical decisions related to the vendor’s efforts must involve the client and the client’s cost consultant and ultimately, must be approved by the client.

Production of the commercial/advertisement is the responsibility of the third-party production company and the client. We do not control the production services provided by the third-party, nor do we direct the creative process for the commercial that is delivered to the client. The director controls the creative process and the third-party production company hires the director.

Our involvement in the process is to provide advice and consultation on consistency between the content of the commercial and the creative marketing idea and strategy, as well as coordination services as a consultant. In the separate commercial production SOW, the client specifies the amount of any incremental out-of-pocket costs, such as travel costs incurred by our Agency that they will reimburse.

A portion of the Agency fee may be applied to production coordination services if required, as well as any creative support services, if any are needed.

The creative idea is that of the Agency, but the intellectual property (IP) is owned by the client. The commercial is directed and delivered by the third-party production company.

Our Agencies do not have the capability to produce a commercial without third-party production companies. This is not a line of business we are in, as we do not own large scale (Tier 1) production or post-production facilities.

We also evaluated the criteria in ASC 606-10-55-37A. An entity that is a principal obtains control of one of the following:

An asset of another entity that it then transfers to the customer. The third-party production company does not transfer the asset to the Agency.

The right to a service to be provided by the other party, which the entity can direct the other party to provide to the customer. The Agency does not direct the activities of the third-party production company, it provides advice and consultation.

A good or service from another entity that it then combines with other goods or services in providing the specified good or service to the customer. The Agency does not combine the third-party production company services with its services. The Agency provides limited services to the third-party production company.

Since many parties are involved in the process, we tested our involvement against the criteria included in ASC 606-10-55-39 and we concluded that we are acting as an agent with respect to the production of the advertisement because:

The fulfillment and acceptability of the services is the responsibility of the production company, not our Agency.

Our Agency does not have general inventory risk as it does not purchase, or commit to purchase, third-party production services to produce the commercial prior to having an agreement in place with the client.

Our Agency does not have discretion in establishing the price for the specified goods or services. The price of the production services is determined by the production company and the price is approved by the client.

Strategic Media Planning and Buying Services are covered by a separate SOW. Our Agency may or may not be the creative agency of record when we are engaged to provide Strategic Media Planning and Buying Services.

In media buying, we arrange, on behalf of the client, to purchase media from media vendors in all applicable media channels.

OMNI 009

All insertion orders (purchase orders) to buy media require client approval and are cancelable by the client until at or around the time the media is scheduled to run.

We do not have sole discretion regarding the media that is purchased.

With respect to the media buying process, we act as a conduit for the transaction. We do not take control of the media vendor’s asset (ASC 606-10-8-37A). The client approves all media purchases which are required to be billed to them at vendor prices without any markup.

Our agreements with the media vendors stipulate that we are not required to pay the vendor until and to the extent we receive payment from the client - “pay when paid”. This occurs in two ways:

In the U.S. and other markets, we contract for the media as an agent for a disclosed principal.

In other markets where the agency relationship in not legally recognized, a “pay when paid” provision is included in the arrangement with the media vendor.

We considered ASC 606-10-25-25 and concluded that we do not control the media provided by the third-party media vendor, nor do we have sole discretion regarding the media that is purchased. Additionally, the media vendor or the client can pre-empt or cancel the media buy prior to media being run. We do not combine our services with the media vendor as our services are separate and distinct from their services (ASC 606-10-55-37A).

In addition, applying the criteria in ASC 606-10-55-39, we concluded we are acting as an agent with respect to the media purchases because:

Our Agency does not control the media vendor;

The fulfillment and acceptability of the services is the responsibility of the media vendor, not our Agency;

Our Agency does not have general inventory risk as it does not purchase, or commit to purchase, media prior to having an agreement in place with the client; and

Our Agency does not have discretion in establishing the price for the specified goods or services because the price of the media is determined by the media vendor and the price is approved by the client.

Media Buying Services

In certain cases, when media is bought by the client through an affiliated Agency, the MSA/SOW must include a provision, or the client must agree to an amended MSA/SOW that allows for media purchases by an affiliated Agency (an example was included in the client contract/SOW for Media previously sent to the Staff). The amount charged to the client by the affiliated Agency is approved by the client (and the actual cost of the media to the affiliated Agency is not required to be disclosed to the client).

ASC 606-10-55-37A provides that an entity is a principal if it takes control of an asset of another entity that it then transfers to the customer. Because the affiliated Agency purchased the media directly from the vendor prior to transfer of the media to the client, it took control of the goods or services. Our affiliated Agency has discretion in establishing the price for the goods or services because the price of the media is determined by the affiliated Agency and the price is approved by the client.

Applying the criteria in ASC 606-10-55-39, we are acting as principal with respect to the media purchases by an affiliated Agency because: the affiliated Agency is responsible for fulfilling the promise to provide the goods or services; and the affiliated Agency has discretion in establishing the price for the specified goods or services because the price of the media is determined by the affiliated Agency.

Read in the reply ↗

Please revise the reconciliation of the non-GAAP measure EBITA to begin with net income, the most directly comparable GAAP financial measure. Your current presentation places greater prominence on the non-GAAP measure and is inconsistent with Question 102.10 of the updated Compliance and Disclosure Interpretation Guidance on non-GAAP financial measures issued on May 17, 2016.

Rest of the question

In addition, please revise your presentation in your next earnings release.

In response to the Staff's comment, we have revised the presentation in our earnings release for the three months ended March 31, 2017 (“Q1 2017 Earnings Release”) to reflect a reconciliation of non-GAAP financial measures as presented in Attachment 1, and we advise the Staff that future filings, including our Quarterly Report on Form 10-Q for the three months ended March 31, 2017, will include this revised presentation. The Q1 2017 Earnings Release was furnished as Exhibit 99.1 to our Current Report on Form 8-K on April 18, 2017.

Rest of the answer

We believe that the modified presentation is consistent with the guidelines in Question 102.10 of the updated Compliance and Disclosure Interpretation Guidance on non-GAAP financial measures regarding the disclosure and prominence of non-GAAP measures.

Read in the reply ↗

We note your disclosures of the components of revenue change on page 15. Please disclose in more detail how you calculate the amounts identified as Acquisitions, net of dispositions, why it is calculated in this manner and why you believe this measure provides useful information to investors. In addition, provide a table showing the components that make up your calculation of Acquisitions, net of dispositions.

No numbered answer found in the reply. Read the reply ↗

Regarding your measure of organic growth, please disclose why management is apparently attributing any positive developments in an acquired business that may have taken place during the period preceding the acquisition to organic growth. Explain how investors should consider this circumstance when assessing performance using your measure of organic growth. Financial Statements 7. Segment Reporting, page F-17

We have combined our response to Staff Comments 2 and 3.

Omnicom was formed in 1986 through the merger of several advertising, marketing and corporate communication Networks. Throughout our history and continuing to this day, our acquisition strategy is focused on pursuing selective acquisitions of complementary companies with strong entrepreneurial management teams that typically currently serve, or have the ability to serve, our existing client base.

Rest of the answer

Over the last several years the acquisitions have been of small to moderately sized businesses that have not been determined to be significant, either individually or in the aggregate, that would require preparation of acquired business financial statements under Rule 3-05 of Regulation S-X. In addition, we continually evaluate our portfolio of businesses to identify underperforming and non-strategic businesses for disposition. The dispositions have also been of relatively small businesses that have not been determined to be significant, either individually or in the aggregate, that would require preparation of pro forma financial statements under Article 11 of Regulation S-X. To help our shareholders and investors, although we are not required to do so, we have historically isolated the net effect on our revenue from acquisitions and dispositions, as well as the effects of changes in foreign exchange rates, in our presentation of the components of our change in revenue and have included this presentation in our annual and quarterly reports and earnings release materials.

Description of and Calculation of Acquisitions, Net of Dispositions

Omnicom has consistently disclosed the components of the change in our revenue for over 15 years, and has described the calculation methodology below the tabular presentation in our Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”). The calculation of organic growth has been applied consistently over the period, and we believe it provides useful information to aid investors in understanding the period-to-period changes in our revenue resulting from foreign exchange impacts and our acquisition and disposition activity.

Our organic growth calculation starts with prior year reported revenue and ends with current year reported revenue. We start and end with reported revenue so that all changes in revenue from period-to-period are reconciled to our reported revenue amounts. We believe this approach adds to the clarity of our disclosure. We categorize the changes into one of three components: the impact of foreign exchange rates, the impact from acquisitions, net of dispositions, and organic growth.

Our organic growth calculation can be broadly described as a rate / volume variance calculation applied to our ongoing operations. First, we calculate the rate component by isolating and quantifying the effects of foreign currency (“FX”) rate changes on our current year reported revenue by applying prior year FX rates to current year reported revenue. The resulting volume variance has two components: the effect of acquisition revenue, net of dispositions (which are also measured at prior year FX rates), and a residual amount that we attribute to Omnicom’s organic growth.

We described the organic growth calculation in detail in our Q1 2017 Earnings Release as follows:

We use certain terms in describing the components of the change in revenue.

Foreign exchange rate impact: calculated by translating the current period’s local currency revenue using the prior period average exchange rates to derive current period constant currency revenue. The foreign exchange rate impact is the difference between the current period revenue in U.S. Dollars and the current period constant currency revenue.

Acquisition revenue, net of disposition revenue: Acquisition revenue is calculated as if the acquisition occurred twelve months prior to the acquisition date by aggregating the comparable prior period revenue of acquisitions through the acquisition date. As a result, acquisition revenue excludes the positive or negative difference between our current period revenue subsequent to the acquisition date and the comparable prior period revenue and the positive or negative growth after the acquisition date is attributed to organic growth. Disposition revenue is calculated as if the disposition occurred twelve months prior to the disposition date by aggregating the comparable prior period revenue of disposals through the disposition date. The acquisition revenue and disposition revenue amounts are netted in the presentation above.

Organic growth: calculated by subtracting the foreign exchange rate impact component and the acquisition revenue, net of disposition revenue component from total revenue growth.

The above description was included in our Q1 2017 Earnings Release, and reflects modifications made to address Staff Comments 2 and 3 regarding the calculation. It is, however, substantively similar to our description in prior years. We will include the above description in our future filings.

Attributing the Positive and Negative Developments of the Acquired Business Post-Acquisition

As noted in the description above, and as presented in the Example below, because we use the comparable prior year period revenue of our acquired businesses, as if the acquisition occurred 12 months prior to the acquisition date, our calculation of the acquisition revenue, net of dispositions component excludes the positive or negative difference in revenue subsequent to the acquisition date and therefore the positive or negative growth after the acquisition date is attributed to Omnicom’s organic growth. We believe this is appropriate. For 2016, this resulted in a reduction of $10.2 million in Omnicom's reported organic growth of $528.1 million (see Attachment 2 - Item (a), “Impact of Acquisitions on 2016 Organic Growth”).

If we were to include the entire current year revenue of our acquired businesses as our acquisition revenue in the calculation, this would exclude from Omnicom’s organic growth the positive or negative organic growth from our acquisitions. This “alternative” presentation essentially would postpone the evaluation of the positive or negative impact of the performance of the acquisition for which capital was deployed until the second year of its operations as part of Omnicom. For 2016, the “alternative” presentation would have resulted in a minor change to Omnicom's reported organic growth rate of 3.5% (see Attachment 2 - Item (b), “Impact of Alternative Calculation on 2016 Organic Growth”).

Because our acquisitions have historically consisted of smaller businesses, the effect of their positive or negative growth relative to the growth from Omnicom’s core business has not been significant and, therefore, there is little difference in whichever method is selected. Nonetheless, we believe our approach and our presentation is preferable. We believe including the prior year revenue of our acquisitions in the acquisition revenue component of the organic growth calculation is similar to a pro-forma presentation that is typically done assuming the acquisition occurs one year earlier than the acquisition date. We use this calculation to evaluate the performance of the management team of the newly acquired business as well as the management team of the Network or group within Omnicom responsible for integrating the newly acquired business into our existing operations. Moreover, we believe an equally important factor is that the calculation of acquisition revenue, net of dispositions has been done consistently year to year and this eliminates any bias in the calculation.

To avoid any doubt, we are providing the Staff with an example of an actual organic growth calculation for a recent acquisition completed in 2016 (in millions).

Example of Acquired Company Organic Growth Calculation

Agency "A" - Acquisition date April 1, 2016

April 2015 Through December 2015

January 2016 Through March 2016

Total

Pre-acquisition:

Comparable Prior Period Revenue

$

9.8

3.7

13.5

April 2016 Through December 2016

January 2017 Through March 2017

Post-acquisition:

Current Period Revenue

10.9

3.0

13.9

Calculation:

Q2 2016 Through Q4 2016

Q1 2017

Prior Period Reported Revenue - Omnicom

—

Foreign Exchange Rate Impact

Acquisition Revenue, Net of Disposition Revenue

Organic Growth

1.1

(0.7

)

0.4

Current Period Reported Revenue

Note: The agency included in the above Example is a U.S. based agency; therefore, there was no foreign exchange rate impact.

Supplemental Revenue Change Tables

We have included tables in Attachment 2 for Omnicom on a consolidated basis that present: (a) the impact of acquisitions on our 2016 organic revenue growth, (b) the impact of the alternative calculation, which eliminates the effect of organic growth attributed to acquisitions, on our 2016 organic growth, and (c) the components that make up our 2016 calculation of acquisitions, net of dispositions.

Conclusion - How Investors Should Assess Our Performance Using Omnicom's Organic Growth Calculation

We use the Omnicom organic growth measure as one of our performance indicators. Our organic growth calculation, which is akin to a rate / volume variance calculation, has three components: impact from FX rate changes, impact from acquisition revenue, net of dispositions, and organic growth. We use the prior year revenue of our acquired businesses and disposed businesses to calculate the effect of our acquisitions, net of dispositions component to the organic growth calculation. This approach effectively mirrors a pro-forma calculation, which similarly assumes the acquisition or disposition occurred one year earlier. The resulting effect has the positive or negative revenue growth after the acquisition date attributed to Omnicom organic growth. This assigns accountability for the acquisition in the first year of combined operating results, both good and bad, to our management team that authorized the acquisition and committed Omnicom's capital. We believe that this presentation is more useful for investors than the alternative presentation described above, which essentially eliminates the impact of the acquisition, positive or negative, from this evaluation.

Furthermore, the positive or negative effect from acquisitions on Omnicom organic growth has been immaterial as the businesses we acquire have historically been relatively small and the effect of their positive or negative growth as compared to the positive or negative growth of Omnicom’s core business historically has not been significant. This is illustrated in the table that we have provided, as requested by the Staff, which shows the details of our acquisitions, net of dispositions component for the year ended December 31, 2016 (see Attachment 2). Finally, by consistently applying our calculation over the years, and including both the positive or negative effects of acquisitions in the Omnicom organic growth calculation we have eliminated any bias from the calculation.

Financial Statements

7. Segment Reporting, page F-17

Read in the reply ↗

We note you determined that your five branded agency networks comprise your operating segments which meet the criteria for aggregation since the segments have similar operating and economic characteristics. To help us understand how you applied the guidance in FASB ASC 280, please provide us with the following information:  a comparison and contrast of your operating segments relative to the areas listed in ASC

Rest of the question

280-10-50-11(a) to (e);  your consideration of differences among your operating segments and why you determined that disaggregation was not warranted;  how the primary service offering of each branded agency network and respective brand distinction are considered in your aggregation analysis;  each branded network’s historical and projected revenues, gross margin, operating margin, and measure of segment profitability; and  an explanation of why the company is organized in the manner that it is.

to the evolving marketplace, we have created or adapted client service models to allow agencies to service clients according to the way the client is structured or the way they wish to procure our services. These client service models are proprietary and include five specific types:

Model 1 - [***] (e.g. a multinational consumer products company).

Model 2 - [***] (e.g. a multinational energy company).

Model 3 - [***] (e.g. a global financial services company).

Model 4 - [***] (e.g. a global auto manufacturer and multinational pharmaceuticals company). Read in the reply ↗

Segment Reporting, page F-17 1. We note you identify your Networks by name on your website. Please provide us the names of each of the five numbered Networks in your response and their respective geographic jurisdictions/ organizations as applicable. 2.

Rest of the question

Given that each Network (or major agency within each Network) appears to have its respective brand distinction and primary discipline, tell us how this differentiation and respective offering matter to a client in its Network (agency) selection decision. 3. We note in your response to comment 4 that Networks 1 and 2 were legacy from formation while Networks 3, 4 and 5 evolved over time. In this regard, please tell us: a. how agencies get assigned to a particular Network; b. how much advertising revenue is earned by Networks 1, 2, 3 and 5; c. how much revenue from CRM, PR and Specialty services are earned by each Network; and d. under what circumstances, how often, and to what extent has your CODM moved a client relationship from one Network to another or to another agency within a Network. Explain to us how this impacts your reporting. 4. You also provided us your aggregation considerations based on Network similarities in terms of their economics, products and services, and distribution methods. In those respects, we have the following comments. a. Tell us more in detail the underlying factors and the nature of Network 1’s customers/ contracts to explain why its margin is consistently different from the other Networks. b. Since advertising is the primary discipline of Networks 1, 2 3 and 5, please provide additional details regarding why they appear to be economically dissimilar. c. Given that the work for a particular client can come from 4 or 5 Networks, tell us how revenue and expense associated with a client (contract) is allocated to each of the Networks. d. Given that you report services and their respective revenues across four disciplines, tell us how you concluded that the services provided under each of these disciplines are similar (for example, explain how you concluded that advertising is similar to CRM). 5. With respect to Network 4: a. Tell us, in more detail, about its types of services as compared with those of the other Networks which report advertising as their primary discipline. b. Tell us how you considered Network 4’s practice areas in your aggregation analysis and how material they are in relation to Network 4’s total revenues. c. Explain to us your specific plans in forming new practice areas within Network 4. 6. Given your notable “wins” of large media accounts, tell us under which reportable discipline are media agencies’ revenues included and how media services are similar (dissimilar) in material respects to that reportable discipline.

The names of each Network, as they correspond to the Network referred to in our letter to the Staff dated April 28, 2017 (the “Response Letter”) are as follows:

•Network 1 - [***]

•Network 2 - [***]

•Network 3 - [***]

•Network 4 - [***]

•Network 5 - [***]

Geographic Organizational Approach

Our Networks operate in all major global markets and through their branded agencies provide a comprehensive range of advertising, marketing and corporate communications services.

Rest of the answer

Although some of our Networks also bear the same name of their globally recognized communications agency brand, the Networks are not comprised exclusively of agencies that operate within that branded group of companies. Each Network has a regional reporting unit responsible for the agencies in that region. The Network regional reporting unit has a manager that is responsible for the operations and administration of the agencies in the regional unit. Our Networks operate and manage their business in three principal geographic regions: the Americas, EMEA and Asia-Pacific. Omnicom also has resources in each of these regions to help coordinate shared functions. Within the major markets of each region, the Networks have resources to service their major global clients where most of each Network's revenue is earned. The geographic diversity of the Networks is an outcome of client service needs. As discussed further in comment 3a below, investments to develop a Network’s service capability are evaluated from the totality of Omnicom’s existing capabilities. As a result, the geographic footprint of any one of our Networks is not a strategic imperative. The Omnicom CODM evaluates the need to invest in a specific country or region after careful consideration of the depth of our capabilities across all Networks.

The following is a summary of revenue by geography:

Network

Americas:

North America

[***]

Latin America

EMEA:

Europe

Middle East and Africa

Asia Pacific

2. Given that each Network (or major agency within each Network) appears to have its respective brand distinction and primary discipline, tell us how this differentiation and respective offering matter to a client in its Network (agency) selection decision.

RESPONSE

Our agencies sell their intellectual capital and use their brand and culture to distinguish themselves from competitors, including their affiliated companies. Most potential client opportunities require the ability to deliver a broad range of capabilities and a demonstrated ability to collaborate effectively across service disciplines as part of an integrated team, comprised of both internal and external groups. In this context, our Networks and agencies compete both against each other and with each other on a regular basis in the marketplace. Certain client briefs may be narrow in their scope, and focus specifically on a project or capability for which they have a need. To start, certain agencies will not be considered by the client because of the perception of a conflict of interest if a Network or agency performs similar services for a direct competitor. Our agencies with the specific capabilities requested would participate in the pitch and the potential clients would base their decision on their assessment of how well the agency meets their requirements. In most of these cases, the client's decision is based on its assessment of the people that will perform the work and the agency’s prior success working on similar projects. For example, clients may require assistance with developing a name for a new product, or they may have a need for in-store messaging and media services. In these cases, agencies with the specific expertise would likely participate in the pitch, which may result in the participation of one of our branding specialist agencies, and shopper marketing agencies, respectively. However, more often than not, these projects are not undertaken in a vacuum and the proven ability to collaborate with other service providers used by that client is a requirement of the brief.

Looking forward, because of the rapidly changing technology and media landscape, clients continue to demand integrated solutions to their advertising and marketing needs and we expect the lines between the disciplines, from traditional media advertising campaigns, public relations programs and customer relationship marketing, to continue to blur. The goal of our Networks and agencies is to understand the client’s marketing strategy, collaborate to develop the content across the disciplines in the most effective way, and deliver a seamless integrated consistent message that is adaptable to the vast array of traditional and new media channels. We believe the investments we have made, and continue to make, to develop our virtual client Networks and our key client matrix organization has us well-positioned for the future state of advertising, marketing and corporate communications.

3. We note in your response to comment 4 that Networks 1 and 2 were legacy from formation while Networks 3, 4 and 5 evolved over time. In this regard, please tell us:

3a. How agencies get assigned to a particular Network.

RESPONSE

The assignment of an agency to a particular Network typically results from our legacy structure, an internal decision to re-align an agency within our Network structure to better support our virtual client Network strategy or, in some cases, an acquisition initiated by a Network. However, the re-alignment of agencies can and does result from a variety of other factors. An agency may be re-aligned: (a) in an effort to avoid conflicts of interest when we are dealing with clients within the same industry, (b) when the client has moved from one Network to another Network, or (c) where a management change occurs and a key manager is moved from one Network to another and the agency or agencies under the responsibility of that manager will follow the manger to the new Network. In these cases, we are indifferent to which Network the agency is aligned, as long as we are providing the solution that best meets our clients’ needs.

As discussed in the Response Letter, the primary strategic focus of Omnicom's CODM is our virtual client Networks. Under this approach strategic decisions are made from a client perspective and the resulting impact to the Networks is evaluated as an outcome rather than an objective. One way to describe the interrelationship of our Networks in our virtual client Networks is by using an analogy to a portfolio of investments. In this comparison, the clients are the investors, the Networks and agencies are the investments and the Omnicom CODM is the investment manager. Like any sound investment manager, the CODM strives to seek out the best investments, manage concentrations and align the investments with investor (client’s) objectives. All the strategic and tactical considerations of the CODM that directly impact the Networks, from resource allocations that involve investments in people and systems, to the acquisition of businesses and new clients, are made from the perspective of the totality of Omnicom’s portfolio of businesses and not any one Network. Also, in this regard, from the perspective of the virtual client Network strategy, all the service capabilities do not necessarily have to exist inside each Network. As a result, we do not consider the depth of the service capability by discipline to be an important strategic factor for our Networks to be able to compete effectively in the marketplace. In fact, as discussed in greater detail below, we are in the process of culling out from each Network certain disciplines and combining them to form practice areas that we expect will enable the agencies to collaborate across our virtual client Networks even more efficiently and effectively.

3b. How much advertising revenue is earned by Networks 1, 2, 3 and 5.

3c. How much revenue from CRM, PR and Specialty services are earned by each Network.

RESPONSE

By way of background, in prior years we described our advertising services discipline as “Traditional Media Advertising,” which included professional services to both create advertising ideas and content, as well as to plan and execute their delivery through various media channels. In response to the many changes that have occurred to the media landscape (including the proliferation of digital media channels and platforms, such as Google, Facebook and Netflix, and “over-the-top offerings,” among others, as well as the ubiquity of mobile devices) over the past five-plus years, we concluded that the term “Traditional” no longer fit with the services we currently provide and, as a result, we shortened the name of our services discipline to “Advertising.”

Advertising

CRM

Public Relations

Specialty Communications

Customer Relationship Management (CRM) services enable clients to manage, analyze, improve, facilitate or support customer interactions through various channels, including, among others: direct marketing, social media, e-commerce, mobile marketing, and field and channel marketing.

Public Relations services include: brand marketing, corporate communications, crisis management, public affairs, media and media relations services, and content marketing.

Specialty Communications include advertising and media services to global healthcare clients, as well as other agencies that provide industry specific knowledge.

3d. Under what circumstances, how often, and to what extent has your CODM moved a client relationship from one Network to another, or to another agency within a Network. Explain to us how this impacts your reporting.

RESPONSE

Managing client relationships is at the heart of the virtual client Network strategy. Given our vast client base, it is no overstatement to describe client service considerations as a daily event. As a result, it is impossible to quantify the frequency of client relationship movements and transfers between the Networks completely and accurately. Our organizational structure considers this and, as a result, we have a matrix alignment consisting of key client team leaders who report to Omnicom's Executive VP of Client Services and the Network CEOs. The overall goal is to provide quality services to our clients that meet and exceed their expectations and where those expectations are not being met, we undertake actions necessary to remedy the situation and keep the client’s business within the Omnicom family.

Situations do arise from time to time where a client is moved across agencies or across Networks. Examples of circumstances that can result in moving a client’s business within the Omnicom family are:

a) The client requires a change and a fresh perspective for their brand and more than a change in a few people servicing the business at the incumbent agency, b) To prevent the appearance of a conflict of interest, if an agency or Network wins a large piece of business, we may choose to move the business with the potential competitor client to another Network, c) The key client contact(s) change and the client has a prior relationship with key people at one of our other agencies and we therefore determine that a change of agencies will best serve our client, or d) The client re-organizes its internal organization and we conclude that a similar reorganization of our resources would better align with the client’s needs.

There are many recent occasions where key client team leaders will recommend to the Omnicom CODM to move a provider of advertising and marketing services from one Omnicom agency to another. This is a result of a myriad of factors, including performance, chemistry, proximity and perceived conflict.

Over the past twelve months, we estimate client movement from one Network to another, or to another agency within a Network, represented hundreds of million of dollars in revenue and approximately one-third of our revenue is monitored constantly by our key client team leaders for potential client service re-alignment.

•

[***] - Network 3 to Network 2

[***] - Network 2 to Network 1

[***] - Network 3 to Network 4

[***] - Moved agencies within Network 2

[***] - Network 1 to Network 3 and back to Network 1

[***] - Network 4 to Network 3

[***] (Brand) - Network 1 to Network 4

When significant revenue is shifted from one agency or Network to another agency or Network, the corresponding revenue and profits of the Networks and agencies are impacted accordingly. However, the effect of these moves had little or no impact on Omnicom other than some inevitable severance and other costs incurred in the transition process.

While client transfers occur often, the frequency of transfers of agencies between Networks varies from year to year. In the past two years, excluding the movement of agencies arising from the formation of the Healthcare Advertising and Public Relations practice areas, we moved 10 agencies from one Network to another Network, five in each of 2016 and 2017. These transfers affected all five Networks and aggregated $400 million of revenue ($40 million in 2016 and $360 million in 2017). While we generally have these transfers completed and effective as of the beginning of each year, they can, and do, occur during a year. Unlike client transfers between Networks, for management reporting purposes when we move agencies between Networks, we restate the prior year amounts for comparability.

4. You also provided us your aggregation considerations based on Network similarities in terms of their economics, products and services, and distribution methods. In those respects, we have the following comments.

4a. Tell us more in detail the underlying factors and the nature of Network 1’s customers / contracts to explain why its margin is consistently different from the other Networks.

RESPONSE

There is nothing unique about the clients, contracts or services of Network 1. In fact, like the other Networks, a substantial portion of the total spending by its major clients is shared with all the other Networks. Also, similar to our other Networks, in most cases all of the services provided to the shared clients fall under the same Master Services Agreement (“MSA”), which provides the obligations, responsibilities and duties of each party and the basic fee structure. It is a common business practice for clients to operate under one MSA across all our Networks and to have separate underlying scope of services arrangements with each Network or agency. Under the scope of services arrangements, the individual agencies providing services negotiate the specific terms and fees of the engagement, typically on a rate per hour basis which varies by staff classification assigned to an engagement. Although there are differences both within and across Networks and agencies, the differences in staffing rates across our agencies (on a geographic basis) are not substantial. Accordingly, the differences in margin of Network 1 are not attributable to any of the five economic factors described in ASC 280-10-50-11 (a) to (e) as more fully described in our Response Letter to Comment 4(2). In our view, the range of margins across our Networks is not in any way indicative of any meaningful difference in the risk or opportunity inherent to each of our Networks. For example, as set forth in Attachment 3 and using the Revenue and EBITA amounts from Attachment 5 in the Response Letter, we compared the margins of the two Networks at the high end and low end of the range of our Network EBITA margins. We believe this analysis further supports our conclusion that there is no fundamental economic difference between our Networks.

The major cost components of each of our Networks, like any other service industry, are people, facilities and technology. In order to effectively compete in the marketplace, each of our Networks is faced with paying market rates and, except for some opportunities in markets where there are some differences in each Network’s geographic footprint (the majority of the difference is in the smaller markets), there is no significant opportunity for any of our Networks to manage its cost structure in our major markets in a materially different way. While efficiencies can be achieved through scale and centralization, the most significant factor contributing to the variability in margins of our Networks arises from client wins, losses and spending patterns. In this regard, we looked back to the financial crisis of 2008 and the recession that followed in 2009 and we noted the Networks were similarly impacted with approximately a 200 bps decline in margins. However, between 2009 and 2010, Network 1’s largest client filed for bankruptcy, and this led to a loss of an additional 200 bps to Network 1 and, as a result, its margins were consistent with the other Networks. We believe this supports our view that all of our Networks margins are equally subject to the ebb and flow of the spending by their specific clients and that the range of difference in our Networks margins are not indicative of a material difference in any unique economic characteristics that one may or may not have over another. Finally, as described in Response 6, Network 1 and Network 5 combined recently to win a large client engagement. Our virtual client Network approach and the role of Annalect, our data and analytics platform, was critical to that win. While all of the costs of creating and maintaining Annalect are absorbed by Network 5, the benefits are shared across all our Networks, which in this particular instance benefited Network 1 significantly as it was able to keep and hopefully grow an existing client relationship, as opposed to losing the client. Given our strategic focus on our virtual client Networks, for performance management purposes we do not allocate costs incurred by the Networks, including SG&A, that benefit Omnicom as a whole, nor do we allocate corporate costs that benefit the Networks. However, as these costs are integral to the successful execution of our key client matrix organizational strategy, each Network should be allocated its share of costs in some rationale manner. In considering the economic similarities of our Networks for the purposes of our segment reporting aggregation analysis, by allocating our SG&A and corporate costs, as well as the costs of Annalect across our Networks, as presented in Attachment 2, the resulting EBITA margin percentages are more closely aligned. In conclusion, we believe there is no fundamental economic difference between our Networks.

4b. Since advertising is the primary discipline of Networks 1, 2, 3 and 5, please provide additional details regarding why they appear to be economically dissimilar.

RESPONSE

As discussed above, we believe all of our Networks are economically similar. They operate in the same industry, serve similar and in many cases the same clients, have the same economic characteristics and are subject to identical risks and opportunities, much of which results from the ebb and flow of client wins, losses and spending patterns. Also, as noted above, while subject to the same fundamental operating costs in major markets, there are some differences in the smaller markets which could impact relative margins. For example, one Network may at the request of a client need to open an agency in a country that is not profitable and but for the client request there would not be a strategic reason to continue to operate in that country. In addition, variations in efficiencies in our operations that arise from centralization and other best practices are at different phases in development at each Network. While this contributes to a difference in margins currently, we expect this to narrow over time as best practices are implemented. At the Omnicom level, we have recently increased our focus on harmonizing our back-office approach across our agencies and Networks in the areas of real estate, information technology, and client accounting and other administrative services. We expect the standardization of these functions and processes will result in the normalization of certain variations in the cost structures of most of our agencies. In managing our Networks, the Omnicom CODM gives similar margin objectives to each agency and the expectation over time is that there is no basis for substantial differences in margins across the Networks. Accordingly, we believe presenting disaggregated information based solely on the variations in margin that arise is misleading and not consistent with management’s view that the performance of each Network is dependent on the successful execution of our virtual client Network strategy.

The Network alignment is not the primary means used by senior management and the CODM to evaluate the success of our virtual client Network strategy. The managers at the top of this Network alignment are accountable for the portion of Omnicom’s client-service delivery strategy that is executed through the agencies in their Network. Strategically, we operate as one business, as evidenced by the sharing of clients and revenue across Networks, geographies and disciplines. See Response Letter Attachment 3. The vast majority of our top 100 clients are served by 4 or 5 of our Networks. We believe our virtual Client Networks are a differentiation strategy, whereby we strive to capture a greater share of our top 100 clients’ marketing spend. In this regard, over 75% of our agencies serve our top 20, 50 and 100 clients. See Response Letter Attachment 4. In fact, as we pointed out in our Response Letter to Comment 4(5), as well as 3 above, in executing the virtual client Network strategy, clients or client projects may be intentionally moved between Networks. In a disaggregated presentation of the Networks this could appear to effect profitability while in totality there is no impact to Omnicom overall. Maintaining our agency and Network brands and their cultures and effectively integrating them into our virtual client Network strategy has been proved successful for both the agencies and the Networks, as well as Omnicom as a whole. The foundation for this success lies in Omnicom’s historical culture of collaboration and putting the best interests of our clients ahead of any internal cost allocation process. These internal costs are integral to the successful execution of our key client matrix organizational strategy. When considering the economic similarities of our Networks for the purposes of our segment reporting aggregation analysis, by allocating our SG&A and corporate costs, as well as the costs of Annalect across our Networks, as presented in Attachment 2, the resulting EBITA margin percentages are more closely aligned. In conclusion, we believe there is no fundamental economic difference between our Networks.

4c. Given that the work for a particular client can come from 4 or 5 Networks, tell us how revenue and expense associated with a client (contract) is allocated to each of the Networks.

RESPONSE

As discussed above in our reply to Comment 3, generally our key client team leaders working with the Network that has the primary client relationship are charged with sales lead generation and matching the right resources with client needs. In these cases, which represent a substantial portion of integrated client engagements, revenue is generally based on a statement of work that is negotiated directly with the client by the performing agency and there is no allocation of revenue or costs between the relationship Network and the performing agency. In other cases, where the relationship Network incurs centralized costs relating to servicing the account, there typically is an allocation of revenue to the relationship Network from the performing agency for reimbursement of these costs.

4d. Given that you report services and their respective revenues across four disciplines, tell us how you concluded that the services provided under each of these disciplines are similar (for example, explain how you concluded that advertising is similar to CRM).

RESPONSE

At the core of all our services is the ability to create or develop a client’s marketing or corporate communications message into content using our intellectual capital that can be delivered to a target audience across different communication mediums. Each of the agencies within the Networks requires professionals with a skill set that is common across all of our disciplines and Networks. Core competencies include: (a) an ability to understand a client’s brand and its selling proposition; (b) an ability to develop a unique message to communicate the value of the brand to a target audience; and (c) whether through traditional means or emerging digital platforms, using marketing technologies to analyze data and develop insights and creative solutions. Differences between the disciplines are more representative of how, where and to whom the message is conveyed. For example, a client may use one of our agencies in our advertising, CRM or public relations discipline to target a message to consumers on a social media platform. The client will likely choose the discipline based on factors specific to the efficacy of the discipline as it relates to the message being conveyed. A company trying to reach a broad set of consumers with an environmental message may choose a creative advertising agency, or if their goal is to create a social media dialogue with consumers, they may choose a public relations agency, but the underlying fundamental services provided would be identical to the CRM services provided to a company trying to reach targeted consumers on a digital platform while they are researching or shopping for a specific product or service on the Internet. That is, the services provided by each of the agencies in their respective disciplines will be provided by using our intellectual capital to develop the appropriate content or message for the communications / media channel to be used and ensuring it is being delivered to the right people in the right place at the right time.

As discussed previously, clients today are looking for an integrated solution across all disciplines. The choice of which agencies and Networks will participate in large, cross-Network new business opportunities is made based on what is in the best interest of the client, or potential client, and not based on the near-term prospects and profitability of our particular agencies or Networks. In response to the evolving marketplace, we have created or adapted client service models to allow agencies to service clients according to the way the client is structured or the way they wish to procure our services. These client service models which enable our virtual client Network strategy are summarized in the visual aide included as Attachment 1. Our focus is on what is best for our clients and not on how our internal profits may be allocated across our networks. Our over-arching strategy for the business is to continue to invest in the capabilities of these virtual client Networks to grow our business relationships with our largest clients by serving them seamlessly across our Networks, disciplines and geographies. We believe that meeting these client demands would be a practical impossibility without the commonality of services, delivery processes and business models that characterize Omnicom agencies and Networks wherever they operate. Accordingly, it’s becoming less important which Network delivers the services. As a result, we believe that the revenue by discipline information we currently supply to investors in our 10-Q and 10-K, which is a measure of where clients are spending their advertising and marketing communications dollars with us, is more meaningful to investors than a reporting of how much clients are spending with individual Networks.

5. With respect to Network 4:

5a. Tell us, in more detail, about its types of services as compared with those of the other Networks which report advertising as their primary discipline.

RESPONSE

Network 4 provides the following client services:

(1) Services provided that are also provided by the other Networks:

•Advertising and media services and Healthcare Advertising and media services to national and pan-regional clients, primarily through regional advertising agencies.

•Public Relations services, such as brand marketing, social media strategy, corporate communications, crisis management and media services.

Digital / Direct Customer Relationship Marketing services to help clients communicate with and deepen their relationship with their best customers,

•Branding services, including consulting services, package design, in-store design, strategic communications and naming services,

•Shopper Marketing, which provides “in-store” and “on-line” advertising, media and communications,

•Events, Experiential, and Activation services, which communicates the brand experience to consumers in an interactive environment, and

•Sales Support, which helps clients communicate with their customers in a sales or support setting.

(2) Services included in our CRM discipline that are provided exclusively by Network 4:

•Specialized Marketing and Communications services, including: Field Marketing, Not-For-Profit Marketing, Sports Memorabilia Marketing, Point-Of-Sale Promotion, and Custom Research.

Network 4 provides services in all four of our disciplines. As presented in our reply to Comments 1 and 3, it has the higher concentration of CRM, public relations and specialty communications agencies compared to our other Networks. Network 4 came into existence largely because of acquisitions, many of them very early on in the formation of Omnicom. One of the fundamentals of our acquisition strategy has always been to acquire businesses that expanded our reach with existing clients. As a result, at the time of acquisition most of the businesses currently in Network 4 were instinctively part of a virtual client Network and we were indifferent as to which Network structure they would report under. We remain indifferent today and recently moved substantially all the public relations and healthcare advertising services out of our other Networks to form separate practice areas under Network 4. Similarly, these practice areas are easily interchangeable between Networks as we operated these businesses as Network agnostic prior to their reorganization into Network 4.

5b. Tell us how you considered Network 4’s practice areas in your aggregation analysis and how material they are in relation to Network 4’s total revenues.

RESPONSE

The Omnicom Public Relations Group and the Omnicom Health Care Group practice areas comprised [***] and [***] of Network 4's 2016 revenue or [***] and [***] of Omnicom's 2016 revenue, respectively.

While Network 4 provides a full complement of services, another way to describe Network 4 is from the perspective of its role in our virtual client Network strategy. While opportunities for expanding our virtual client Networks pivot at entry points related to industry, geography, discipline or talent at any and all of our Networks, Network 4 provides the most pivot points across the disciplines. Since placing the most disciplines under Network 4 does not provide any strategic advantage in the marketplace and does not change the economic profile of these businesses, we do not believe that the weighting of disciplines is a basis for disaggregation under ASC 280-10-50-11, particularly as these businesses are critical to the success of our virtual client Network strategy and Omnicom as a whole.

The practice areas were first conceived in late 2015 as part of an evaluation of our overall portfolio of businesses and our organizational structure and as part of our succession management strategy. The Omnicom Public Relations Group (OPRG) and the Omnicom Health Care Group (OHCG) practice areas were substantially completed by the end of 2016. The functional executives of these two practice areas report into the CEO of Network 4 and as most of the agencies in OPRG and OHCG were already included in Network 4, we did not consider this a material change to our existing reporting structure. As a result, for purposes of our aggregation analysis we included these two practice areas in Network 4.

The goal of the practice area concept is to ensure the continued success of our virtual client Network strategy by bringing agencies operating in common disciplines together to allow collaboration to occur more effectively and efficiently across the key client matrix organization and enhance client integration by eliminating inherent organizational boundaries. In addition, the expectation is that the practice areas will provide us with the ability to better leverage existing resources, create additional custom client solutions and more effectively use our investment dollars across a broader group of agencies.

5c. Explain to us your specific plans in forming new practice areas within Network 4.

RESPONSE

As part of our continuing evaluation of our portfolio of businesses and our organizational structure, and in the context of our management succession planning process that we review with our Board of Directors, we are considering creating additional practice areas and re-aligning the affected agencies across our current Network alignment. The leaders of these potential new practice areas will report into one of our five Network CEOs, while preserving the matrix organizational structure of our virtual client Network strategy. This process is not exclusive to Network 4 and agencies within our CRM discipline. Given our other Networks already include agencies that cross over several disciplines, and in an effort to provide expanded opportunities for our key managers as part of the succession management process, we expect both the agencies that will form the practice areas and the management reporting lines of the practice area leaders will impact all of our Networks.

6. Given your notable wins of large media accounts, tell us under which reportable discipline are media agencies’ revenues included and how media services are similar (dissimilar) in material respects to that reportable discipline.

RESPONSE

As previously mentioned, in prior years we described our advertising services discipline as “Traditional Media Advertising,” which included professional services to create advertising ideas and content (traditionally thought of as advertising services), as well as professional services to strategically plan and execute their purchase and delivery through various media channels (traditionally thought of as media services). The services are provided in the same way, through the use of the intellectual capital of our people and delivered to clients in the same way, through consulting services which leverage the skill sets of our people. However, in response to the many changes that have occurred to the media landscape (including the proliferation of digital media channels and platforms, such as Google, Facebook and Netflix, and “over-the-top offerings,” among others, as well as the ubiquity of mobile devices) over the past five-plus years, we concluded that the term “Traditional” no longer fits the services we currently provide and, as a result, we shortened the name of our services discipline to “Advertising”. As a result, the advertising discipline includes revenues from our media agencies, as they are most similar and most closely aligned within our virtual client Network. However, media is an integral component of all our service disciplines.

Historically, while media was always an integrated component, the available distribution channels were narrower and thus the emphasis was on matching the message to the media selected. Today, as media distribution is much more fragmented, clients expect a campaign to match the message to the consumer. To be successful, our clients expect us to deliver the right message to the right (targeted) consumer at the right time. To be most effective at accomplishing this, our agencies need to create insights and ideas using information about the targeted audience. As previously mentioned, Annalect, our data and analytics platform, serves as the strategic foundation for all of our agencies and Networks, across all disciplines, to help achieve these goals. Thus, media is a homogeneous component of any message and as a result, revenue from fees for strategic media planning and buying services is embedded in all of our disciplines. In some cases, our agencies, especially in our advertising, specialty communications and public relations disciplines, have media services embedded in their client arrangements, which are principally fee for service arrangements, or in a few cases, they may have a commission fee structure based on the total media spend. When our advertising, healthcare advertising, public relations, direct marketing and shopper marketing agencies have media included in their fees, we do not attempt to distinguish, or cull out, the media component as generally we have found that when media is integrated into the service component this cannot be done with a high certainty of accuracy. As a result, media related revenue is included in the respective discipline as part of their agency revenue.

A little over ten years ago, we created a fifth Network, called Omnicom Media Group. Prior to that point, all of our media services were included in the service offerings of our other four Networks. We were the last major participant in our industry to do so, because of our strong belief in the need for providing an integrated and collaborative service offering and we did not want to create a new Network unless we could ensure that our virtual client Network strategy would continue to enable this integration to continue. It is also important to note that for regulatory purposes, in several markets (most notably Brazil), media services are not permitted to be segregated from other advertising services. In certain other markets, for performance management purposes, we have chosen to not separate the media agency brands from the services provided by the main agency and media related revenue at those agencies report into their respective Networks. Additionally, as discussed above, media related revenue is also a part of our agencies’ revenue in our other disciplines, particularly healthcare advertising, public relations and certain direct marketing and shopper marketing agencies that are part of our CRM discipline. For all these reasons, we do not attempt to capture revenue in a separate media discipline and when media services are performed by Network 5 we include this revenue in our advertising discipline where they are most similar and most closely aligned.

We have been successful recently with several client wins which received a good deal of external attention and several of them were publicly described as “media only” wins. Although each win was different based on the scope of each client brief and the challenges that each client was trying to address, the most notable wins resulted from our ability to provide an integrated, multidisciplinary approach at scale. For example:

Our win of the creative and media advertising work for AT&T was due in large part to our ability to provide an integrated solution, as noted by the client: “Omnicom has brought together one dedicated team representing the best talent across Omnicom to work seamlessly with us … A single integrated team allows us to move quickly, innovate at scale and take a data driven holistic approach to reaching the consumer.” This engagement is led by our BBDO advertising agency team and Hearts & Science, our new data driven marketing and media agency that is part of Network 5. Together they service the business from shared office space throughout North America and they work very closely with the other members of our AT&T virtual client Network team comprised of agencies from our other three Networks.

Our win of McDonald’s North American integrated advertising and marketing services engagement was based on our ability to deliver a fully integrated solution including strategy, creative and analytical capabilities involving agencies across multiple Networks and disciplines to create the “agency of the future.” This engagement is led by a new agency team created for McDonald’s called “We are Unlimited.” The team works out of a common office location and is comprised of members from several agencies in our other Networks, including data analytics support from Annalect, public relations and CRM discipline expertise and strategic media planning and buying team members, as well as other third-party partners.

Our win of P&G’s pitch of its North American media services business was primarily the result of our ability to demonstrate a superior strategy, the foundation of which again was Annalect, our data and analytics platform. The pitch resulted in the creation of Hearts & Science, our new data driven marketing and media agency and, although it did not include a creative advertising or marketing services component, the agencies that were part of our preexisting P&G virtual client Network team played important roles in the win (we provide services to P&G across several of our other Networks and in several other service disciplines).

Although we have not been successful in every notable pitch we participated in and we have unfortunately had some client losses as well, we believe our ability to provide a fully integrated service offering by collaborating across agencies and Networks using our virtual client Network strategy through our key client matrix organization has and will continue to make us successful.

As described previously, we are indifferent to which Network these client engagements and their resulting revenue and profits reside, as well as the potential impact on each individual Network’s results. The choice of which agencies and Networks will participate in large, cross-Network new business opportunities is made based on what is in the best interest of the client, or potential client, and not based on the near-term prospects and profitability of certain of our agencies and Networks. Our focus is on what is best for our clients and not on how our internal profits effect performance management measurement across our Networks. In managing the business and making resource and capital allocation decisions, we do not limit ourselves to the organization boundaries of our five Network structure. The Network alignment is not used by senior management and the CODM as the primary means of evaluating the success of our virtual client Network strategy.

The concept of integration has of course existed for a long time, but it has evolved from tactical collaboration to critical connectivity. Merging and connecting disciplines around the consumer experience is an imperative. Because consumers now travel between mediums in a seamless fashion, we can no longer service clients from silos. The lines between our service disciplines continue to blur as consumers are increasingly connected and technology enabled. Our goal is to be able to continue to build tools and processes to help us follow and understand the consumer across devices and media channels and develop ways to provide services to our clients by creating meaningful insights via data and analytics that lead to big and fully integrated creative ideas and new client engagements.

Conclusion

We believe that aggregation of our five Networks is consistent with the objective and basic principles of ASC 280, and our analysis demonstrates that they have similar economic characteristics and we meet all applicable aggregation criteria of ASC 280-10-50-11. We believe that a segment presentation by Network would not be consistent with the objectives of our client-centric approach to managing the business to meet our clients’ objectives across disciplines and geographies and would not capture the way our business is organized. Further, we do not believe that separate reporting of segment information by Network would add significantly to an investor’s understanding of our business. To the contrary, we believe that such a presentation would detract from that understanding. For example, in the delivery of our client service strategy, it is not uncommon for our clients or us to move assignments from one agency to another across Networks. Under a segment presentation it would appear as though one segment lost revenue and the other segment gained revenue; in reality, no meaningful change occurred at the consolidated level and no significant change in the future prospects of either Network occurred.

We present the financial statements of Omnicom for reasons set out above. We have consistently provided disaggregated data and enhanced transparency by disclosing in our MD&A our revenue by (1) geography, (2) marketing service discipline, (3) industry and (4) revenue change by component, including (a) the impact of foreign exchange rate changes, (b) acquisition revenue, net of disposition revenue, and (c) organic growth. These disclosures are consistent with disclosures in our earnings releases and quarterly investor and analyst presentations and evolved based on input from investors as to information important to them. We believe that, taken together, these disclosures and presentations give users of Omnicom’s financial statements information necessary to understand our performance and outlook for future cash flows and are more consistent with the CODM’s focus on our business. We currently plan to create several new practice areas which will vary in size. Upon completion of this process, we are aware that these actions could be a triggering event under our internal controls over financial reporting requiring us to reevaluate our aggregation analysis under ASC 280. Finally, we believe that our presentation is more consistent with our client-centric approach to the management of our business and provides sufficient information for investors to use data that is consistent with the information used by management to make informed decisions about our performance and prospects.

* * * * * * *

We hope that you find the foregoing to be responsive. Please do not hesitate to contact us if you have any questions regarding the foregoing and, of course, if you have any additional comments. Questions or comments should be directed to me at (212) 415-3098. Thank you in advance for your cooperation in this matter.

Read in the reply ↗

Please revise your income statement presentation to fully comply with the line item requirements of Rule 5-03 of Regulation S-X.

As a matter of convention and in an effort to streamline the presentation in our prior filings, we included in the footnotes to the financial statements, rather than on the face of the income statement, salary and service costs and office and general expenses (the cost categories we use to measure operating expenses). In addition, depreciation and amortization was separately disclosed in the statement of cash flows and not on the face of the income statement.

Rest of the answer

In light of the Staff’s comment and our further review of the requirements of Rule 5-03 of Regulation S-X, in future filings we plan to include these cost categories on the face of the income statement as described below and as presented in Attachment 1. Additionally, in connection with our detailed analysis of the requirements of Rule 5-03 of Regulation S-X, as described below, we identified certain costs that may be considered for separate disclosure. However, due to the insignificance of these costs, we do not believe separate disclosure on the face of the income statement is warranted at this time (we also summarized our findings on Attachment 2).

Below we will address each of the relevant provisions of Rule 5-03 of Regulation S-X as it applies to our filings.

Revenue

Our revenue is generated from our services. We do not sell tangible products, nor do we have returns and allowances. As disclosed in our 2015 10-K, substantially all of our revenue is derived from fees for services based on a rate per hour or equivalent basis and certain of our businesses earn a portion of their revenue as commissions. In the majority of our businesses we act as an agent and record revenue equal to the net amount retained when the fee or commission is earned. In these cases, activities of third-party suppliers incurred on behalf of our clients are excluded from our revenue. In certain arrangements, we act as principal and we contract directly with third-party suppliers and production companies and media providers and we are the primary obligor responsible for fulfillment. In these circumstances, revenue is recorded at the gross amount billed to our clients since revenue has been earned for the sale of our services, including third-party efforts.

There is no difference in the nature of the services we provide to our clients when we act as agent or principal. In both cases, our agencies typically develop the creative idea, design the communication strategy and coordinate the execution of the advertising campaign, promotional event and/or communication program. The fundamental difference of our service deliverable when we act as principal is that we control the integration of the components provided by third parties, and deliver a complete service to our clients. As a result, our fee includes third-party activities necessary to fulfill our obligations under the contract.

As described in our footnotes, revenue is recorded net of sales, use and value added taxes. We do have a CRM business that also sells memorabilia products through its subsidiaries. Total revenue from that business is less than one half of one percent of our consolidated revenue and, as such, is not material enough to merit separate disclosure.

Based on the foregoing, we believe that our presentation is in compliance with Rule 5-03 of Regulation S-X.

Costs and Expenses Applicable to Revenue

As stated above in the background information, we measure operating expenses in two distinct cost categories: salary and service costs and office and general expenses. As a service business, salary and service costs comprise the vast majority of our operating expenses and substantially all these costs comprise the essential components directly linked to the delivery of our services, such as employee compensation, including freelance labor, personnel related costs, direct service costs and client-related travel costs. Office and general expenses consist of the indirect costs related to the delivery of our services including, office and equipment rent, other occupancy costs, technology costs, depreciation, amortization and other overhead costs.

As disclosed in our 2015 10-K in Note 2 to the consolidated financial statements (“Note 2”) and in Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) on page 18, the classification of our operating expenses in these two categories effectively groups together our operating costs that tend to fluctuate directly with changes in revenue (salary and service costs) and those that are less directly linked to changes in revenue (office and general expenses). We believe that this presentation best reflects the nature of our cost structure in providing client services, is aligned with our revenue and in compliance with Rule 5-03 of Regulation S-X.

As disclosed in our 2015 10-K in Note 2 and MD&A, operating expenses for the three years ended December 31, 2015 were (in millions):

2015

2014

2013

Salary and service costs

$

11,361.9

11,350.0

10,724.4

Office and general expenses

1,852.4

2,023.7

2,034.8

13,214.3

13,373.7

12,759.2

In response to the Staff's comment, in future filings we will provide separate disclosure directly on the face of the income statement of salary and service costs and office and general expenses. We will also provide separate disclosure on the face of the income statement of depreciation and amortization, which are currently included in office and general expenses (See Attachment 1).

Other Operating Costs

As discussed above, our indirect operating costs and expenses are currently included in office and general expenses. In prior filings, as circumstances arose, we have disclosed significant other operating costs and expenses in the footnotes to the consolidated financial statements and in MD&A. For example, in our Annual Reports on Form 10-K for the years ended December 31, 2014 (the “2014 10-K”) and 2013 (the “2013 10-K”), we separately disclosed the expenses attributed to the terminated merger with Publicis Groupe S.A. (See Note 5 to the consolidated financial statements in the 2014 10-K and Note 3 to the consolidated financial statements in the 2013 10-K). If similar other operating costs are significant in the future, we will evaluate them for separate disclosure on the face of the income statement.

In addition to depreciation and amortization, which we will separately disclose on the face of the income statement in future filings, our networks and agencies incur certain recurring costs and expenses, including severance and certain professional fees, that may not be directly attributed to providing client service. These costs were approximately $233 million, $272 million and $290 million in 2015, 2014 and 2013, respectively. We do not believe the amount of these other operating costs have been significant enough to warrant separate disclosure on the face of the income statement. We will monitor the amount of these and similar costs in the future and in the event they become significant, we will consider separate disclosure of our other operating costs on the face of the income statement.

We have not identified any other similar expenses that we believe would warrant separate disclosure on the face of the income statement.

Selling, general and administrative expenses.

Omnicom's networks and agencies do not maintain separate sales forces. Our business model was built and continues to evolve around our clients. We continually seek to grow our business with our existing clients by maintaining our client-centric approach, as well as expanding our existing business relationships into new markets and new service disciplines and with new clients. In addition, we pursue acquisitions of complementary companies that typically currently serve or have the ability to serve our existing client base. In the normal course of business, our networks and agencies both gain and lose business each year due to a variety of factors. Significant new clients often result from successful responses to requests for proposals and not from the efforts typically associated with a separate sales force. Our networks and agencies redeploy existing resources to respond to such requests. Accordingly, we do not allocate salaries or other costs incurred in connection with this effort to selling expense and these costs remain in salary and service cost and office and general expenses, as applicable.

Our agencies undertake promotional events including agency marketing and advertising and participation at award and trade shows and incur third-party costs in connection with these activities. Currently the cost of these marketing efforts is included in office and general expenses. The third-party cost of our marketing efforts was approximately$162 million, $191million, and $190 million in 2015, 2014 and 2013, respectively. While these costs may be considered selling and administrative expense, we do not believe that these costs are significant enough to warrant separate disclosure on the face of the income statement.

Substantially all our salary expense is directly related to providing our client services and is reported in the salary and service cost line. As a result, certain administrative costs are included in the salary and service costs category. These administrative costs are included in the overhead cost of our businesses and are incorporated into their overhead rates and, as such, these costs are an integral part of our operating costs and are appropriately included in salary and service costs.

In addition, we include our executive office administrative costs, which primarily consist of salary and related expenses, in the salary and service cost line. While these costs may be considered general and administrative expenses, we do not believe that these costs are significant enough to warrant separate disclosure on the face of the income statement.

Bad Debt Expense

As most of our revenue is derived from highly credit worthy clients and we frequently have client arrangements that require advance payment, our bad debt expense has been immaterial. As disclosed in Schedule II to the 2015 10-K, bad debt expense was approximately $4 million, $8 million and $10 million in 2015, 2014 and 2013, respectively. We do not believe that these costs are significant enough to warrant separate disclosure on the face of the income statement.

Other General Expenses

We have not identified any other general expenses that we believe would warrant separate disclosure on the face of the income statement.

Non-Operating Income and Interest Expense

Interest income and interest expense are already reported as separate lines on the face of our income statement. Additional detail regarding the significant components of interest expense is included in Note 6 to the consolidated financial statements in our 2015 10-K.

Non-Operating Expenses

Although we did not have any non-operating expenses for the periods presented in our 2015 10-K, if such costs are significant in the future we will disclose them on the face of the income statement.

Income before Income Tax Expense and All Other Appropriate Items

Omnicom currently provides the information required, when applicable and appropriate.

For the Staff's convenience, we have provided a summary of the immaterial costs described above that we do not believe warrant separate disclosure on the face of the income statement (See Attachment 2).

*****

At the request of the Staff, Omnicom acknowledges that (i) Omnicom is responsible for the adequacy and accuracy of the disclosure in the above-referenced filings, (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the above-referenced filings, and (iii) Omnicom may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope that you find the foregoing to be responsive. Please do not hesitate to contact us if you have any questions regarding the foregoing and, of course, if you have any additional comments. Questions or comments should be directed to me at (212) 415-3098.

Thank you in advance for your cooperation in these matters.

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