Omnicom, Interpublic Won't See Daylight on Revenues Until 2010, Say Analysts
Things still don't look that great for Omnicom and Interpublic, according to analysts at Jefferies & Co., despite upbeat prognostications from some in the ad biz that we're about to turn the corner. In a note to investors, J&C's Brian S. Shipman, Patrick Fitzgerald and Kip Paulson said:
Despite improving sentiment and claims from traditional advertisers that advertising is improving sequentially, we don't believe the improved tone is translating into incremental brand commitments for the agencies.
... ad executives of privately held companies are still more likely to see clients cutting budgets than increasing them, despite observing that ~80% say clients are more optimistic.The trio have put their finger on an interesting structural problem for agencies: Clients tend to set their ad budgets in yearly cycles, so even if the underlying economy improves, client CFOs won't hand out extra ad money until the year is up. That's why agencies won't feel their pain easing until 2010:
... we do not expect improving tone to be reflected in agency revenue performance until 1Q10 at the earliest and more likely 2Q10.The J&C gang cite General Mills, General Motors, and Pepsi as brands that have already made noises about increased 2010 budgets. J&C lowered its revenue growth estimates for both Omnicom and IPG as a result:
- IPG
- Q309: 18.1% decline in revenues
- FY09: 13.7% decline in revenues
- OMC
- Q309: 13% decline in revenues
- FY09: 12.9% decline revenues