It’s an ill wind….when Omnicom and Publicis Groupe aborted their $35bn merger back in the summer it looked likely that both marcoms giants would struggle to regain momentum but that doesn’t seem to be the case at all.
While Publicis boss Maurice Levy has said his company won’t meet its sales forecasts this year – blaming the merger distraction – Omnicom is surging on, with CEO John Wren (left) reporting higher than expected third quarters sales and profit figures. Omnicom’s total revenue rose 7.4 per cent to $3.75 billion with ad revenue up 12.5 per cent. Profit rose to $239.5 million, or 95 cents per share, from $191.2 million, or 74 cents per share, a year earlier.
Revenue from the United States, which accounts for two-thirds of Omnicom’s total, rose ten per cent. International revenue increased 4.7 per cent. Organic revenue, the key measure, rose 6.5 per cent in the quarter against previous forecasts of four per cent.
The US has been the best-performing ad market in the world this year, with the UK close behind. And ‘traditional’ ad agencies are syill outperforming their newer, trendier rivals like digital agencies in both revenue growth and profit, as their margins tend to be higher. Media buying, on the other hand, is seeing its margins eroded by programmatic buying.
A further factor is the growth of online video. Omnicom said recently that 25 per cent of its TV adspend was headed for online video but that’s hardly good news for its media agencies. There isn’t much planning and buying involved on YouTube. Trad agencies, on the other hand, are, after a struggle no doubt, able to bump up their fees for producing free media content.
Omnicom’s current performance is a poser for WPP as well as Publicis. WPP boss Sir Martin Sorrell, like Levy, has been talking up and spending heavily on more digital agencies, particularly in markets like China. But big ad agencies, like Omnicom’s BBDO and DDB, are expert at pulling digital work away from smaller specialists and back in-house. Slowing growth in the old BRIC markets and newer emerging ones is also impacting profits, not least because currencies in these countries are under pressure.
