Omnicom Group reported organic revenue growth of 5.2% for the first quarter of 2023. Q1 results were released today after the close of market trading. The firm is the first of the major ad holding companies to report results for the period.
Reported total revenue in the quarter increased 1%, to a little more than $3.44 billion.
Organic growth (which excludes M&A and currency impact) by discipline in Q1 was as follows: 5.1% for Advertising & Media, 7% for Precision Marketing, 5.8% for Public Relations, 4.8% for Healthcare, 8.4% for Experiential, 3.6% for Execution & Support, and 3.3% for Commerce & Brand Consulting.
And by region: 5.1% for the U.S., 5.4% for Europe, 5.9% for the United Kingdom, 2.8% for Asia Pacific, 12.2% for Latin America and 9.5% for the Middle East & Africa.
The company confirmed on an earnings conference call that it took further steps in Q1 to cut back its real-estate portfolio given the transition to a more flexible working environment where staffers work at home part of the week. The firm recorded a pretax charge of $119.2 million related to those portfolio moves.
That said, Omnicom also recently mandated that employees work at least three days a week at the office. "We're a creative services company," Wren told analysts on the earnings call. "We work better when we're together."
The firm is also exploring the use of satellite offices to ease horrific commutes in some cities, like New York. Instead of traveling into Manhattan, CEO John Wren explained, staffers residing in the tri-state area can travel shorter distances to outposts set up in New Jersey, Connecticut and Long Island.
Wren also discussed a recent deal with Microsoft to explore opportunities utilizing generative artificial intelligence. The company is placing most, if not all, of its historical data on top of the tech firm's generative AI platform and is looking to create new models to interact with consumers.
The company is talking with clients about adding their data. Wren said there were more than a dozen projects being explored on both the back-office and revenue sides of the company. The firm's Omni platform is linked to an AI platform as well.
There are also many issues to be worked out before the company goes full steam ahead with GAI projects, said Wren. "There are lots of ethical and privacy questions," he said. "We need standards and rules in place," before deploying the technology to the full extent.
As uncertainty continues on the macroeconomic front, Wren said some clients are avoiding long-term commitments. The Fed is driving growth down to protect the economy and it is for that reason, said Wren, that he is more confident that Omnicom will reach the lower end of its growth forecast this year of 3% and less confident at least for now about reaching the “stretch goal” of 5%. “It’s just common sense not to fight the Fed,” he said.
And he related a conversation he had recently with the president of Adobe about self-fulfilling prophecies when it comes to the economy. According to Wren, the Adobe executive told him, "I wish people would stop talking the economy down. Business is great."