Agency group Omnicom has raised its growth forecast for 2022 after a strong Q3, raising its expected full year organic growth from 6.5-7 percent up to 8-8.5 percent. While macroeconomic factors continue to put pressure on advertiser budgets, Omnicom says it has continued to drive better than expected growth.
Total third quarter earnings reached $3.443 billion, marking growth of $8.4 million on a reported basis (which was low due primarily to currency effects, since almost half of Omnicom’s business is outside the US), bu5 7.5 percent on an organic basis. Organic growth for advertising specifically was 5.9 percent, while Omnicom’s Precision Marketing segment grew by 16.3 percent on an organic basis.
CEO and John Wren said he’s confident that despite macroeconomic factors, the business is well placed to weather the storm.
“Our experience with challenging economic environments leaves us confident that we can navigate through current business uncertainty,” said John Wren, chairman and CEO of Omnicom. “One thing remains certain – the path from marketer to consumer is becoming exceedingly complex, and Omnicom has the talent and capabilities to be the trusted advisor to drive success for our clients.”
Longer term growth painting positive picture
The results continue a trend over the past year of agencies reporting strong growth and upbeat outlooks, while ad revenue reliant tech companies paint a much more gloomy picture.
The bulk of this discrepancy is down to the difference between agencies and tech companies in terms of what constitutes strong financial results. Tech companies are expected to deliver explosive growth every quarter. For example Snapchat’s growth of 13 percent in Q2 earlier this year – higher than any agency group’s projected growth for the year, was lower than expected.
For agencies, the expectations are much different, and after years of questions about agency groups’ ability to deliver meaningful growth, the current picture is a relatively positive one.
CEO Wren argued as much in Omnicom’s earnings call, saying that the company’s current organic growth is the result of structural and strategic changes, which have been enough to help it weather a difficult ad market.
“We made investments in areas where we believe that growth would be consistent in good times and in bad, you can see that reflected in our precision marketing assets,” said Wren.” You can see that in the changes that were made in our public relations category and also the expansion of services in the health area. So as well as more traditional areas, we cleaned up low growth geographies and/or what we felt were product loans.”
But there also may be an element of agency revenues from advertising being hit less hard than tech company ad revenues.
Wren said that Omnicom is still seeing enthusiasm for brand building which overrides economic challenges, but tech companies are less likely to be on the receiving end of those budgets.
“I think every intelligent company is seeing that globally, these macro factors are a mixture for further confusion in a complex environment at one level,” said Wren. “At another level, there’s new areas that are coming on stream that didn’t exist before. If you look at media, you look at all the providers that are out there that have decided to go to add an advertising model to the products that they’re offering. You see our automotive manufacturers, promoting their progress that they’re making with the car of the future being a communication device driven by electric power as opposed to gasoline power. There’s enough fundamental changes that are going on in the marketplace that have kept the marketers keen and very interested.”
