NEW YORK As marketing-service companies released their first-quarter results last week, the expectation wasn't so much about whether the news would be bad, it was more a question of just how bad.
Amid current industry conditions, where negative growth is the new performance metric, Omnicom Group said its year-on-year fall in total revenue (excluding exchange-rate effects) was 6 percent in the first quarter; Interpublic Group, 6 percent; MDC Partners, 7 percent; and WPP Group, 6 percent. Publicis Groupe saw a 4 percent fall in revenue between the first quarter of 2008 and the first quarter of 2009, but reported a 1.3 percent increase when exchange rate effects are included.
Adweek estimates that for these five companies, total revenue fell from $9.4 billion in the first quarter of 2008 to $8.9 billion in the first quarter of 2009, a decline of just under 6 percent.
With marketers slashing budgets, industry results reflected a company's ability to control costs as a way to hold margins in the face of declining revenue and income. Additionally, a company's financial fate was influenced by the size of its digital operations and scale in emerging economies, which help offset exposure to the hard-hit U.S. traditional advertising market. Out of their control, however, were foreign exchange issues because of the strengthening of the dollar.
Omnicom said net income slid 21 percent to $164.5 million, or 53 cents a share, on a 14 percent decline in global revenue to $2.75 billion. About 7.8 percent of that decline, or $232 million, was attributed to foreign exchange. Omnicom cited three factors accounting for over 30 percent of its drop in organic growth: recruitment marketing, specialty and newspaper media businesses and Chrysler.
"Despite the weak top line [Omnicom], management did an excellent job reining in costs, including a $20-25 million reduction in incentive comp in the quarter," said Alexia Quadrani, an analyst with JPMorgan.
IPG reported a first-quarter loss of $73.9 million, or 16 cents a share, compared with a loss of $69.7 million, or 15 cents a share in Q1 '08. The company's revenue fell 10.8 percent to $1.33 billion. Exchange rates had a negative effect of 7.3 percent, while net business acquisitions added 2.1 percent. IPG benefited from a drop of 1.3 percent in international growth, which helped offset a 10.8 percent slide in the U.S. IPG unit Lowe Worldwide, which in the past has been cited as a drag on holding-company results, was singled out for its contribution in European new-business wins.
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