With the major Adland holding companies now all reporting first-half results, Pivotal Research senior analyst Brian Wieser has calculated that combined the firms’ second-quarter performance was even worse than the first quarter from an organic revenue standpoint in the US/North America region.
Wieser -- taking the combined performances of WPP, IPG, Omnicom, Publicis and Havas -- says the firm’s second-quarter organic revenue decline amounted to 0.5%, which followed the collective 0.3% decline in the first quarter.
The analyst noted there has not been a collective decline among the five companies measured in the calculation in any quarter between 2010 and 2016.
Wieser points to a number of reasons for Adland’s deteriorating performance.
Large clients aren’t growing by much and a number have reported negative growth this year. Also, the recent adoption of zero-based budgeting by some has impacted spending on agency services.
Last year’s ANA Transparency Report has been a likely contributing factor, Wieser posits, surmising that “clients have generally tightened up contract language to have the effect of eliminating some of the ways in which agencies generated some of their revenues over the past decade.”
In addition, the slowing growth of digital media among larger marketers has contributed to agency growth issues. Marketers seem to be taking more services in-house than just a couple of years ago.
As for the impact of consultants, Wieser believes it is a bit overstated, at least for now.
Despite the current growth issues, Wieser is not totally pessimistic about Adland’s future prospects.
“Agencies will look to add many of the same services the consultants offer presently,” he believes. “This speaks to a more favorable point of view on the industry: businesses we call ‘agencies’ can be remarkably entrepreneurial, providing us with some confidence that new sources of revenue, which are either modest today or not yet established, will expand or emerge in some form, supporting incremental growth opportunities.”
So let’s get crackin,’ agencies. You’ve got your work cut out for you!