Is ‘no strategy’ paying off for Omnicom?

Is Omnicom – which owns BBDO, TBWA, DDB and Omnicom Media Group among others – doing well or badly?

Its shares fell three per cent yesterday when it reported a 3.6 per cent drop in second quarter revenue in Q2 2019 from $3.9bn to $3.7bn. Omnicom CEO John Wren blamed this on currency movements and disposals, which Omnicom has been quietly making for the past couple of years.

Wren (below) said he was pleased with the results, reporting organic revenue growth (usually seen as the key indicator) of 2.8 per cent. US was up 3.2 per cent, UK up 5.7 per cent while China, hardly surprisingly amid trade wars, went into reverse.

By discipline Omnicom’s advertising and media business grew by 4.4 per cent, healthcare 8.4 per cent and CRM 1.9 per cent. PR fell by 1.3 per cent.

In an earnings call Wren also went on to praise WPP CEO Mark Read for his stand against Accenture, now involved in media on its own account, for its media auditing service.

He also expressed doubts about the wisdom of Publicis and Interpublic investing a combined $6bn in data businesses Epsilon and Acxiom, saying these were “legacy businesses” with privacy problems down the line. He said Omnicom preferred to invest in its own data resources which include Annalect.

So Omnicom may be getting smaller (a bit) but marginally more profitable too. Earnings were up. The initial market judgement therefore seems harsh.

Former WPP CEO Sir Martin Sorrell is fond of saying Omnicom has no strategy although it’s good at operations. If no strategy means not betting the ranch on big data acquisitions and maintaining a roster of strong agency brands then maybe Omnicom’s better off without one.

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