Layoffs at Ad Agencies Likely Much Worse Than Reported

Last Updated Nov 3, 2009 3:24 PM EST

Last month, BNET posed a question: If recovery is around the corner, why are agencies still dropping employees by the dozens? I also predicted that, barring a miracle, revenues at all the major ad agency holding companies will be down (that turned out to be true), and that revenues -- not profits -- are the key to determining when agencies will start hiring again.

With the Q3 2009 earnings season in the rearview mirror, I can say my prediction was off the mark: The job situation at ad agencies is actually a lot worse than it looked before the U.S. holding companies made their earnings releases. It's not "dozens" of layoffs -- it's thousands.

Here's why: Interpublic (IPG) and WPP (WPPGY) both disclosed that the reduction in headcount at their agencies was far larger than previously reported. IPG said it had lost 5,100 jobs when previously only 3,000 lost jobs had been reported. WPP admitted 11,232 jobs were gone when previously only 7,800 job losses were reported.

Omnicom (OMC) said it had axed 5,000 from its staff, when previously it had said 3,500, but added it would continue to adjust its headcount as required.

The less transparent Publicis (PUB) has been secretive about its layoffs. It admitted to 1,800 in July but has not disclosed meaningful numbers since.

In addition, Cliff Freeman & Partners closed its doors.

All this leads me to believe that layoffs at ad agencies -- such as McCann -- have been much more numerous than the business has so far admitted. This does not bode well for the vast army of laid off ad professionals seeking new jobs.

Here's one ray of light. This is a chart from WPP's most recent investor presentation, breaking down growth by region. Note that all areas of WPP's business are still in decline (they're below the 0% line), but that the rate of decline is slowing in the U.S. and Western Europe:

Fingers crossed those lines get back above 0% in Q4 -- if that happens, update your resume. Until then, enjoy your time off.