Ad groups give marketers reasons to be cheerful
The marketing industry has a number of reasons to be cheerful. The world’s largest advertising company has spoken of a rapid rebound in US and UK advertising spending, while other global marketing service companies have announced better-than-expected results, providing evidence of recovery from a bruising recession.
WPP, the world’s largest advertising company and owner of JWT, Grey and Ogilvy Advertising, reported a 2.5% increase in first-half revenue as advertisers in the US and UK increased spending.
WPP added that the second-half of the year should also improve “as the world stabilises and probably avoids a “double-dip” [recession] at least” but will be more difficult because of tougher comparatives in the second half of last year.
Other marketing companies are also cautiously optimistic.
Aegis, which reported a 7.8% rise in pretax profit to €48.3m (£39.6m) in its first half, says that it is optimistic about the short-term outlook after seeing signs of a “rebound” in the advertising and market research sectors.
The group says profit was boosted by a return to profitability for its Synovate market research business and $1bn of new business from Aegis Media, which consists of the Vizeum, Posterscope, isobar and iProspect agency networks in addition to Carat.
Economic growth figures support growing optimism within marketing services.
There was also some encouraging economic news in the UK, with the UK economy growing by more than initially thought in the second quarter of 2010, boosted by a strong performance by the construction sector.
The economy grew by 1.2% in the quarter, the Office for National Statistics (ONS) said, revising up its initial estimate of 1.1% growth. The US economy grew 1.6% in the second quarter, revised down from a first estimate of 2.4%., although this was better than most analysts had expected.
Economic, technological and regulatory trends are expected to boost future growth. growth.
KBC Peel Hunt said in a research note: “Rising M&A activity, increasing global regulation, the continued rise of digital and mobile platforms and global recovery all provide a positive trading backdrop for the marketing communications sector.”
Ad spend growth
Aegis’ optimism was replicated by its Carat media agency network which revised its forecast for global advertising spend this year up to 3.9% from an earlier forecast of 2.9%. Carat expects global advertising spending to reach 4.7% in 2011.
UK spend is forecast to be 3.5% this year, up from a previous estimate of 2.9%.
The dominant trend in marketing remains geographic – the shift in purchasing power from western markets, where growth is generally slow, to the booming eastern Bric markets – Brazil, India, Russia and China – that are seeing double-digit growth in advertising spending.
Martin Sorrell, chief executive of WPP, said: “To use a UK football analogy – there is the Premier League consisting of the BRICs and Next 11, digital media and consumer insight; the Championship consisting of the United States and television, both big and resourceful, never to be under-estimated; and, finally, Division I – Western Europe and traditional print media with legacy methods of production, social mobility costs and healthcare and pension liabilities.”
“The world is growing at least three different speeds. Even Europe, it can be said, is growing at different speeds – Germany and Eastern Europe growing faster than Western Europe.”
Publicis Groupe, owner of Saatchi & Saatchi and Bartle Bogle Hegarty, also recognise the importance of investment in BRIC nations to future proof growth and is said to be in the latter stages of negotiation to take a stake in Brazilian ad agency Talent.
Robert Willott, director of financial research consultancy, Fintellect, says marketing companies are hoping that fast-growing eastern markets can offset sluggish western market, but smaller agencies that don’t have already a big presence in BRIC markets may struggle to compete against larger rivals.
For the moment, however, smaller marketing agencies, say business is good.
Earlier this week, Chime Communications, reported half-year pretax profit of £12.3m, up 35% from the same period a year earlier ahead of City expectations. Profit was boosted by a record level of new business.
Chime, which owns Compare The Meerkat creators VCCP, says it has won 658 pitches representing £19.4m of new business during the period adding Roche, Unilever and Nintendo to its client list.
The company said it was “confident” about the full year and plans to more than double profits within the next four years.
Advertising, agencies, media, PR,
Within marketing services, corporate clients are spending more on PR, marketing companies report in their latest results.
Chime’s PR business, Pelham Bell Pottinger, increased is revenue by 5% and operating profit by 17%.
Willott says that corporate spending on PR has been stronger than expected. This growth has been fuelled by an increase in mergers and acquisitions and “crisis management” when companies in trouble look to PR to protect their brands amid a tough trading environment.
“Its always said that the worst thing you want in PR is a steady business environment,” Willott says. “Fast growth or recession, or any form of crisis needs PR. What you don’t want is stagnation.”
