Big Three: Still Waiting for Recovery

NEW YORK — Advertising’s Big Three holding companies are hoping for an ad recovery, perhaps during this month’s upfront network buying season, but, in the meantime, reduced budgets have cut deep into their bottom lines.

Falloff in client spending was the key culprit behind a worldwide revenue dive of 15 percent and 2 percent, respectively, at Interpublic Group and WPP Group for first-quarter 2002, compared with the same period a year ago.

IPG, in particular, was stung by its heavy reliance on the U.S. market, where client purse strings remain especially tight. The holding company also cited the “carryover effects” of 2001 client losses such as PepsiCo.

And while Omnicom reported an 8 percent revenue gain in the first quarter, industry analysts said its organic growth did not meet their expectations.

IPG CEO John Dooner indicated that clients now seem more positive about the economy. Still, he told analysts last week, “A lot of people are waiting for the gun to go off.”

Indeed, a catalyst is needed, said Omnicom CEO John Wren. (In the last recession, it was Procter & Gamble, which increased its ad spending ahead of the pack.)

Dooner also noted signs that the upfront will be more vibrant than last year’s.

Despite the revenue shortfalls, IPG and WPP expect to meet their goals for earnings growth and operating margin, respectively, for the year. “We remain on target to deliver double-digit earnings-per-share growth,” said Dooner.

Omnicom led the pack in new business in the first quarter with an estimated $1.02 billion in net new billings from wins such as Adidas and Saturn. WPP was next, with about $750 million in net new billings (Domino’s, Haagen-Dazs) followed closely by IPG, at $745 million (MCI, Sony media).

Omnicom and IPG reported first-quarter earnings last week-a week after WPP. Havas and Publicis Groupe S.A. will report their numbers tomorrow and on May 14, respectively.