Omnicom Rises While IPG Falls

Rivalries aside, the contrast in earnings was quite stark when Omnicom Group and Interpublic Group of Cos. revealed their second-quarter numbers last week.

IPG reported a hefty decline in net income, down 49 percent to $117.1 million for the quarter, compared with the same period a year ago. Omnicom, meanwhile, reported an impressive gain of 19 percent in net income, to $151.3 million, versus the same quarter last year.

Each company acknowledged a sluggish economy and its effect on client spending. Yet Omnicom managed to weather the storm, while IPG took a hit. Why? Industry analysts cited several key factors:

• The demands of integrating acquisitions, such as IPG’s Deutsch and True North. “It’s harder to see what’s happening in the world when you’re busy realigning all the internal stuff,” said Alan Gottesman of West End Consulting, who added: “[IPG CEO John] Dooner had his hands full even if nothing bad happened to the externals.”

• The shift of DaimlerChrysler’s massive $1.2 billion account from TN to Omnicom, which kicked in this year. “That probably cost [IPG] a couple of percentage points on the topline,” said David Doft, managing director of ABN AMRO in New York.

• Continued “cycling” of clients due to IPG’s merger of Lowe & Partners and Ammirati Puris Lintas. “That also probably cost them a couple of percentage points,” countered Doft.

• Finally, the proportion of revenue each company generates from non-advertising services. “This quarter, 57 percent of [Omnicom’s] revenue was from marketing services,” noted Doft. “IPG was almost the exact opposite, with 60 percent from advertising and 40 percent from marketing services. And marketing services are holding up relatively better than advertising— especially media buying—in this environment.”

On Friday, Omnicom’s stock closed at $87.48 per share—up from a close of $78.52 on Monday—a day before earnings came out. IPG’s stock dipped as low as $25.90 Friday (the day after its earnings report), before closing at $27.05, down 50 cents from Monday’s closing.

Even Dooner found reason to compliment Omnicom. “There are times [when] it is appropriate to salute your competition, and this is one of those cases,” he said during an analyst call last week. “They seem like they got it all working. And also, if their optimism is correct, then we all benefit.”