Omnicom Group is the latest ad holding company to frighten the stock market horses – following in the hoof prints of WPP – with its shares tumbling nearly ten per cent on Wall Street following disappointing second quarter earnings figures. WPP and Publicis Groupe, still to report, fell in sympathy.
The numbers weren’t actually that bad. Omnicom posted revenue growth of two per cent overall with North America, by far its biggest market with 57 per cent of its business, dropping one per cent and Europe (27 per cent of the total) up nearly 12 per cent. Net income (profit) for the quarter rose to $364.2m from $328.6m, so Omnicom isn’t on its uppers yet.
CEO John Wren (below) blamed the reverses in North America on client losses and cutbacks although he said he expected the second half to be better. But agencies always do.
The problem for the likes of Omnicom and WPP is that the market has lost faith in their ability to rise above the seismic changes taking place in marketing services: more demanding clients clamping down on extra-curricular revenue and the rise of Facebook, Google and Amazon, far the biggest digital players, who can be accessed without the need for an agency. There’s also the growing threat from consultancies like Accenture and Deloitte.
Omnicom has been quietly tidying up its portfolio, selling businesses deemed non-essential and also, belatedly perhaps, entering the data wars with a new construct called Omni. Omni is its answer to US rival Interpublic’s $2bn purchase of most of data specialist Acxiom.
Even so, such a sharp share fall looks overdone although it may be reversed. Omnicom, like WPP, needs a new narrative if the assumption isn’t going to grow that such companies, which have dominated adland for decades, are in slow but terminal decline.
Publicis Groupe’s Arthur Sadoun has at least tried to grasp the nettle with his ‘Power of One’ reorganisation although some might see his ‘solution hubs’ of Communications, Media, Publicis.Sapient and Healthcare as rebranded versions of the dreaded ‘silos.’ Publicis releases its second quarter/first half results on Thursday.
Its bigger rivals will be hoping it does them a favour.
