The Big Four’s mixed Q3 reflects digital advertising uncertainties

The news: Ad agencies turned in uneven third-quarter results, reflecting an environment shaped by economic uncertainty and challenges in China, as well as client wins.

• Among the Big Four agencies, Omnicom Group’s and Publicis Groupe’s revenues grew 6.5% and 5.8%, respectively. WPP Group’s revenues rose a more tepid 0.5%, while Interpublic’s revenues fell about 2%.
• Publicis raised its full-year revenue growth forecast to 5.5% from 5%. Omnicom kept its 4% to 5% outlook, and WPP said 2024 revenues could drop as much as 1%. Interpublic expects organic revenue growth of about 1%, toward the lower range of a prior outlook.

Puts and takes: The ad agencies have been paring costs and adopting AI to improve campaigns and provide efficiencies for their clients. But the companies said the economy’s trajectory was a major wildcard. Omnicom told analysts that the US presidential election was a “significant market uncertainty,” and WPP cited “continuing macroeconomic pressures.”

• Omnicom, parent of BBDO and DDB Worldwide, benefited from ad spending for the Paris Olympics and the US presidential election. It also highlighted winning Amazon’s media account in the Americas.
• WPP, parent of GroupM, Ogilvy, and VML, cited business wins including Amazon’s media account outside the Americas but said China remained a difficult market: An October 2023 bribery scandal in Shanghai led to the arrest of a GroupM executive and caused client relationships to break down.
• Meanwhile, Publicis CEO Arthur Sadoun said the company’s China segment grew 12.4%, outpacing the US and Europe. Publicis has expanded beyond traditional advertising with acquisitions in data tech and more recently influencer marketing, boosting its capabilities and helping it outperform.
• Interpublic, whose brands include Weber Shandwick, Golin, and McCann, cited strength in food and consumer goods but weakness in transportation and technology due to 2023 account losses.

Our take: The Big Four firms’ Q3 reports and cautious outlooks for the current quarter reflect the uncertain state of digital advertising.

• The neck-and-neck US presidential race means the immediate future of the ad industry is up in the air. Regulators under the Biden administration have called for new, intense regulation of the digital ad space, but unclear antitrust agendas from both candidates throw a wrench into those plans.
• Uncertainty surrounding tariffs is also contributing to inconsistent results from China. Donald Trump has proposed tariffs as high as 20% on goods from China, which could cause Temu and Shein—two of Meta and Google’s top ad spenders—to significantly reduce their US ad budgets.