Strong Interpublic financial results swell optimism in global ad recovery

February 24, 2012

Things really must be getting better in the global advertising economy, the cynical might observe. Interpublic, the world’s fourth-largest and most financially challenged advertising conglomerate, has just reported a decent set of Q4 results.

Despite a heavy kicking from principal clients SC Johnson – which quit after decades at IPG subsidiary DraftFCB – and Microsoft – which withdrew all its media strategy and planning business from media powerhouse Universal McCann – IPG was able to report profits (net income) up nearly 40% (50 cents compared with 36 cents per share) on revenue slightly ahead at $2.07bn.

Admittedly IPG chief executive Michael Roth was wary of calling a recovery. “We have some local wins and some existing clients spending money, but I wouldn’t say that the recovery is taking hold and we’ve seen bottom,” he said during the conference call.

But that cautious scepticism was surely belied by his assertion elsewhere that the company is setting out on the acquisition trail.

Besides, a slew of uplifting data elsewhere seems to suggest that IPG’s positive figures are not an isolated anomaly. Publicis Groupe and Omnicom, respectively numbers 3 and 2 in the world, have already posted Q4 results ahead of analysts’ predictions. WPP has yet to report, but there is no evidence the results will be grim. On the contrary, I have every reason to believe pre-tax profits and revenue will be well ahead of analysts’ expectations.

More circumstantially, but no less significantly, the US Advertiser Optimism Index – roughly equivalent to the IPA/BDO Bellwether Report over here – has just reported the second-highest level of confidence in ad budgets being raised since 2008. The index, published by research company Advertiser Perceptions, measured the sentiment of advertisers and agencies during October and November.

Finally, UK-based WARC has just produced a report suggesting America is leading the world out of (ad) recession. “Marketing spend in the Americas increased sharply in February,” it noted in an update to its monthly Global Marketing Index. Even doldrum European ad markets are experiencing “improving conditions”, it seems.

Let’s hope IPA/Bellwether doesn’t spoil the party with its next quarterly report, which must be coming out quite soon.

UK marketing managers should sip from the glass half-full

April 29, 2011

Curiouser and curiouser. Almost all the big battalions in marketing services have now reported their Quarter One financial results. Without exception they mirror the upbeat performance curve of Omnicom, the first out last week. Which is in bizarre contra-distinction to the gloomy outpouring of the Bellwether Report I commented on earlier.

No need for too much fact-grubbing here. Just look at the organic growth of the big agency groups. Publicis Groupe (6.5%), Havas (6.8%) and WPP (6.7%) easily coasted past Omnicom’s already impressive 5.2% global figure. Only Interpublic lagged – and even so achieved a creditable upturn of nearly 5%.

So what, you say? All this shows is a startling outperformance in emerging economies such as China, India and those of Latin America. Which is concealing lacklustre results in doldrums Europe – and particularly the UK.

Not exactly. True, the emerging markets are flattering overall performance. But when you look at the UK, you wouldn’t believe the economy is flat-lining at all. While no one else has achieved Omnicom’s astonishing UK organic growth rate of 9%, the general results are pretty impressive. At the bottom were Publicis, with 2.4%, and Havas (2.5%). Much more significant was WPP’s performance. WPP, now the world’s largest marketing services group, still derives 12% of its global revenue from the UK and managed to extract 7.7% organic growth. What’s more WPP chief Sir Martin Sorrell is cautiously optimistic about the prospects for 2011 and 2012. A more reliable index of Sorrell’s growing confidence is the fact that he has slipped the self-imposed £100m corset off WPP acquisitions; although he does caution the next one will “only” be about £200m. That is, the size of last year’s biggest – Mitchell Communications, which was acquired by Aegis Group.

So what’s with the Bellwether’s pessimism? UK marketing managers really should sip the glass half-full. There’s every reason to suppose it won’t poison them.

Bellwether or Omnicom: whose statistics should we believe?

April 20, 2011

Confused about the state of the marcoms economy? You have every right to be, after comparing and contrasting the slews of statistics spewing out of first quarter assessments.

Grandaddy of them all the Bellwether IPA/BDO report is all doom and gloom. Apparently, marketing budgets have been revised down for the second successive quarter. The only good news is that the rate of decline has slowed – infinitesimally. The report, which surveys 300 companies selected from the UK’s top 1,000 (it says: by marcoms spend presumably), shows a net downgrade of  5.1% in budget. In Q4 2010, the downgrade was 5.4%. Just to drive another nail into the coffin, it also tells us that the survey’s provisional data for actual spend in 2010 decreased for the third year running.

WPP's Sorrell: An answer to the question, maybe?

That, as it were, is in my left hand. In my right hand, I am holding a piece of paper with Omnicom’s first quarter results for 2011 printed on it.  These invite us to take a very different view of the state of marcoms. Omnicom – the world’s second largest marketing services group – is having a very good year so far; and its performance in the UK has been exceptional.

Specifically, the group – which owns such representative agencies as BBDO, DDB, TBWA, OMD and PHD, grew its worldwide revenues by nearly 8% to $3.15bn, with an increase in organic growth of over 5%. The really interesting bit, though, is the fact that organic growth in the UK – not exactly an emerging economy – outstripped that average with a surge of over 9%.

Are these two organisations – Bellwether and Omnicom – inhabitants of parallel universes, perchance? We’ll know more when the other big holding companies announce their Q1 figures. Publicis Groupe is next (tomorrow). But the one to really wait for is WPP – the world’s largest. Its chief, Sir Martin Sorrell, has been bearish on the UK economy in recent times. So it will be interesting to see whether he has, in any measure, changed his mind.

Or maybe not. All of this is a salutary reminder of a saying attributed to Disraeli, “There are three kinds of lie: lies, damned lies and statistics.”

Two cheers for advertising agencies

April 19, 2010

Mixed messages for the advertising industry in two influential reports out today.

First the good news. Recession is definitely behind us and advertising spend poised for significant growth, according to the latest IPA/BDO Bellwether report. For the first time in two-and-a-half years, a majority of UK advertisers are predicting a return to growth in their advertising budgets. That’s not confined to digital advertising, either. Traditional media is set for a boost, although sales promotion and direct marketing continue to trail. At last, a mentality of cost-reduction seems to have given way to the notion of top-line growth.

More chilling – for ad agencies at least – is the message from the CMO Council’s annual State of Marketing survey, which sifts the opinions of 5000 senior marketers who control a collective budget of over $150bn. Apparently, clients are very disillusioned with traditional agencies’ failure to get to grips with online, viral and mobile marketing skills. So much so that they are now concentrating on bringing data capture in house, or using more specialised agencies. In the words of Donovan Neale-May, executive director of the CMO Council: “You’ve got to look at the difference between the ability to create nifty interactive campaigns and actually having customer data, which underpins everything today…Whereas before the agencies had a huge amount of influence, now the companies are going to have the insights about the effectiveness of these campaigns.” He goes on to note that the likes of Infosys, Deloitte and Accenture are moving into the gap.

So, top-line growth, but not for those with an analogue mindset.

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