Ad Agency Results May Signal Bottom For Publishers

  • by July 30, 2020
Correction: An earlier version of this story had the wrong last name for the CEO of Interpublic. The version below reflects the correction.

Several of the world's biggest advertising companies reported earnings results in the past week, and they tended to express cautious optimism that the worst part of the coronavirus pandemic may be behind them.

Their commentary may indicate that publishers will see stronger signs of recovery during the key back-to-school and holiday shopping seasons.

Interpublic Group, Omnicom Group and Publicis Groupe, which command billions in media spending on behalf of advertisers worldwide, just went through one of the ugliest periods since the 2008 financial crisis. Omnicom's revenue dropped 23% in the second quarter from a year earlier, while Interpublic and Publicis both reported 13% declines.

The declines were mostly in line with an estimated 13% drop in U.S. ad spending this year, not including political campaigns, as forecast last month by GroupM, the media-buying unit of WPP. As recently as December, when the Summer Olympics was still on the calendar, the company had expected growth of 4% for the year.



"When it comes to our revenue, Q2 could be the low point," Arthur Sadoun, CEO of Publicis, said in a conference call with investors, while also cautioning about the second half of the year, given that the pandemic could resurface and lead to the resumption of lockdowns.

That idea of the second quarter being a nadir for ad spending was echoed by John Wren, CEO of Omnicom.

"The worst is behind us with Q2 being the low point for year-over-year revenue declines in 2020," he said, while pointing to the retail, food and beverage and automotive industries as showing signs of improvement. The travel and entertainment industries face the biggest difficulties, he said.

Michael Roth, CEO of Interpublic was the most cautious about the second half of the year, citing uncertainty with the pandemic.

"While we had initially seen some signs that the second quarter would prove to be the bottom of the economic decline, there are still too many variables in play to make that determination," he said.

An 8% decline in U.S. revenue wasn't as bad as the declines seen in other countries, which fell by an average of 13%, he said. The healthcare, retail, food and beverage, technology and telecommunications industries were the strongest performers in the second quarter.

Ideally, the commentary by ad agency CEOs indicates that media spending will recover for publishers in the second half, though the pandemic and its economic fallout will continue to drive advertising activity for months to come.

Next story loading loading..