What to Expect From Omnicom and IPG's Annual Earnings Reports

As we settle into February, holding companies are steadily rolling out their 2019 annual reports. Last week saw a mixed report from Publicis Groupe in the wake of a tumultuous year, including a decline in organic growth. This week, Omnicom and IPG will both release earnings reports for 2019. Adweek caught up with Forrester principal analyst Jay Pattisall to ask what to expect from the two holding companies' earnings calls and what to anticipate from each in 2020. The following interview has been edited for brevity and clarity. What can we expect to see from IPG this time around? Pattisall: In the last couple of quarters, Q3 in particular, we saw some organic growth. At the time, their anticipation was that they would hit their [full-year] target of 2-3% organic growth for the fourth quarter. They were kind of bullish in their anticipation of Q4 results. I really don't see anything in the market, specifically to IPG, that would prevent that. Their technology strategy is moving forward. They have been busy integrating Acxiom across their business and launched and created Kinesso, the division that would work side-by-side with Acxiom to help implement the data management and data marketing capabilities [within] their agencies. They’re putting the pieces into place to help continue to grow that ability to scale marketing, particularly media, in a more personalized, one-to-one manner. The more high-profile new business win that I’m aware of is UM and American Express. Acxiom data played [a significant] role in [winning] that business. The data layer continues to play an increasingly important role, and it looks like IPG has taken some appropriate steps to be able to bring that to their agencies. There’s still a lot more to go, though. Do you think the recession is still something holding companies are concerned with and potentially planning for? For the last two to three earnings calls, across the board, the speculation of a 2020 recession has been brought up from analysts. I suppose that they could potentially be asked the same question, but my sense is that the public’s concern around that issue seems to have waned a little bit. Omnicom has a different approach to data with its Omni data platform. How important a role has Omnicom’s attempts to integrate that offering played for the holding company in the past year, and how do you anticipate that contributing to its performance in 2020? I see the Omni platform that Omnicom has built as different in the components, but similar in how they operate and what the results are. What I mean by that is that all of the agencies' audience activation platforms enable them to create, define and enrich audiences with data, and then go and activate them at scale in paid media channels. And then, some of these platforms have [a greater] capacity for measurement and evaluation, and Omni’s platform even has elements that allow insights and inspiration for creative. Omni is distinctive in that creative use case. [kickout id="1"] The principal difference is the type of data and where it's coming from. IPG and Publicis and Dentsu Aegis Network use a proprietary set of data as well as first-party client data and third-party data partnerships. Omnicom uses third-party data partnerships and first-party data. They didn't buy a proprietary set that's associated with any particular data management company. And that's the real difference. They all have the audience activation capability, and as 2020 develops and we may see further restrictions for data and privacy, either in a regulatory environment or as a result of some steps taken by publishers and ad tech platforms. We'll see a bit more restriction around the types of data that are available. And all of the agencies, and certainly Omnicom and the Omni platform, will need to take steps to ensure that they still have access to high-quality data inputs to power their platform. What do you anticipate will be the impact of those types of restrictions? The principal concern is whether in two years' time or so, when Google and Chrome fully deprecate their ability to accept and use third-party cookies, the same level of media data will be available. But in those two years, there will be a significant undertaking to develop other pathways to access similar forms of identity solutions and data solutions. So a lot of that will fall onto the publishers and the data vendors. The agencies will need to take some steps as well. In the end, it will just make the ability to produce high-quality audiences and targets that much more in demand. Do you anticipate organic growth for Omnicom in line with recent results? During the last reporting period, they had indicated several new business wins, including AstraZeneca and Novartis. DDB won Kroeger as creative AOR. They retained [and grew] portions of the Disney business. You have to think about how some of those new business wins will impact Q4, or Q1 of 2020, depending on when they’re factored in. The other thing to consider is that [Omnicom CEO] John Wren’s comments during Q3 reporting were pretty clear, and that they have always characterized Q4 as a transitional period. And because of the nature of their business, all of the retail work that's in the market for Q4 [was done] in preceding quarters. Q4 tends to be a slower period, aside from things like the Super Bowl or the Oscars. So it’s a matter of whether the new business kicked in for Q4 revenues or likely to be reflected in their 2020 numbers. What were some areas of strength for Omnicom and IPG in 2019? What were some areas they need to improve on in 2020? Both Omnicom and IPG have pretty robust media businesses. Omnicom Media Group and IPG Mediabrands both appear to be driving a lot of the activity. The investments that they've made in technology and data are paying off in new business. Where they both have opportunities and areas for more work is connecting their strength in media and their investments in data to their historically impressive creative agencies. I think it will be important to start to see how the data and technology offerings begin to take hold and power that business the way that it has powered media. You mentioned that Omnicom’s Omni platform has taken some steps in connecting to creative. Will other holding companies have to take steps to catch up? An important distinction is that the Omni platform takes [creativity] into consideration, meaning that the platform can be applied to a creative use case. I haven't seen [much] output necessarily. Having it is one thing; applying it is another. I think that both Omnicom and IPG are in a position where there is an opportunity.