WPP: 'Armageddon' Averted, Ad Economy Grows 'Less Worse'

Joining the major advertising holding companies in reporting especially weak third-quarter results, WPP Group nonetheless said overall conditions in the advertising economy have grown "less worse," and that an outright "Armageddon" has been averted in the media industry. "People feel better, their hearts and minds are better but it hasn't been reflected in increased spending yet," WPP Chairman-CEO Martin Sorrell told the Reuters news service prior to a call briefing analysts and journalists this morning. "But it is much less worse in the United States. The down draft is slowing."

WPP attributed some of the easement to easier comparisons with tougher quarters a year ago. In the U.S., for example, WPP said its "like-for-like" revenues declined only 6.1% during the third-quarter of 2009, which compares with declines of 9.4% in the first-quarter and 11.3% in the second quarter of this year. Total worldwide revenues declined 8.7% during the third-quarter, on a like-for-like basis.

However, WPP's "advertising and media investment management" operations performed relatively weaker than the company's overall revenues, "reflecting reductions in clients' traditional media spending and media deflation," the company said.

WPP Group, which is the world's largest advertising and marketing services company, and the parent of media services agencies such as GroupM's Mindshare, Mediaedge:cia, Mediacom and Maxus units, reported that its advertising and media investment management revenues declined greater than the group as a whole, falling 9.8% from the third-quarter of 2008.

However, the third-quarter appeared to be a low point for advertising industry, and the sector has actually tracked relatively evenly with overall company revenues on a year-to-date basis.

WPP's advertising and media revenues declined 8.5% through the first nine-months of 2009, while total revenues fell 8.4%.

While WPP did not explicitly break out its Internet advertising and digital media revenues, that sector appears to be performing better than the advertising industry average.

WPP said combined "direct, Internet and digital" revenues total $2.6 billion for the third-quarter of 2009, or 26% of WPP's total revenues, which is a point greater than the company had been attributing to the sector's share recently.

"There is little doubt that consumer and corporate confidence has recovered somewhat from the panic levels of the fourth quarter of 2008 and first quarter of 2009," WPP said in its earnings release, adding that, "Confidence, however, remains fragile amongst consumers, because of the shadow of high unemployment levels and amongst corporates, because Armageddon and apocalypse now were barely avoided in September 2008.

"Whilst the hearts of CEOs and CMOs are stronger and their minds clearer, increased confidence is still not transferring to their check-writing hands. Brand investment is still in check, particularly in the West, despite most statistical evidence pointing to the opposite of this current conventional wisdom.

"Companies that invest in brands during recessions, emerge with higher sales trajectories, profits and profit margins in better times. As many clients' earnings results show, increased or maintained profits or margins are being achieved by cutting costs, not through increasing revenues.

1 comment about "WPP: 'Armageddon' Averted, Ad Economy Grows 'Less Worse'".
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  1. Mike Einstein from the Brothers Einstein, October 30, 2009 at 10:35 a.m.

    This story, on the heels of yesterday's gloom and doom from IPG, offers further proof that we are playing witness to the demise of advertising as intermediary - the logical extreme of an on-demand world in which consumers are equipped with the means, motive and opportunity to avoid ads altogether.

    It's no coincidence that as online CTRs continue their precipitous decline to statistical zero, time-shifted TV viewing is on the rise - clear manifestations of on-demand behavior at work to eliminate the middleman.

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