Report: 2014 Looking Like A Better Year For Ad Industry Growth

The outlook for agency growth this year is moderately brighter than the growth achieved last year. Organic revenue growth, which excludes the impact of acquisitions and currency fluctuations for the major industry holding companies, is expected to average 5% in 2014, versus the estimated 3.3% gain for 2013.

That’s according to the latest projection from Pivotal Research analyst Brian Wieser.

In a report issued Jan. 17, Wieser wrote that the projected 5% growth level is based upon the median rate of expansion for the global advertising economy as predicted by three widely recognized industry forecasts published by Interpublic Group’s Magna Global, WPP's GroupM and Publicis Groupe’s ZenithOptimedia.

“While ad spending and spending by advertisers on agency services face many different underlying trends and reflect different activities, both sectors have generally grown comparably in the recent past,” said Wieser.

Looking at individual holding companies, Wieser is now forecasting 5.5% organic growth for the Interpublic Group, whose portfolio includes McCann Worldgroup and Mediabrands, which oversees media agencies Initiative, UM and BPN.

“IPG had a weak year during 2013 by many measures,” Wieser stated in his report. “However, by others it set a solid stage for growth to come this year and in years ahead. IPG's new business record in 2013 was probably the best among its peers in proportion to its current size, with particularly notable wins for McCann and Lowe.”

McCann, for example, won all of the global Chevrolet business, which it had previously shared with Goodby Silverstein & Partners, while Lowe won car brand Seat, part of the Volkswagen Group, which sells cars in 77 countries.

Wieser has raised his target price for IPG to $23. The stock closed Friday at $17.46. “Given current upside ... the company remains our preferred stock in the sector,” he said.

Pivotal’s forecast for WPP is 5% organic growth for 2014, in line with the industry average. He believes the UK-based holding company will be “mostly unaffected by meaningful M&A speculation or distraction.” Company leaders have indicated they do not foresee trying to do a merger on the scale of the pending Publicis-Omnicom deal in the coming year.

Publicis and Omnicom also are expected to achieve 5% organic growth in 2014, per Pivotal. Publicis CEO Maurice Levy said late last month that the company experienced some softness in the fourth quarter of 2013, due largely to clients that deferred some spending until 2014 to help improve their full-year 2013 financial results.

All of the holding companies will be reporting their year-end and fourth-quarter 2013 results in the coming weeks. 

"Chart with up arrow" photo from Shutterstock.

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