Car sales are down. Passenger loads on airlines are down. Occupancy
levels at hotels are down. Lately, it seems as if the only economic
statistic on this side of the Atlantic that's heading upward is the
jobless rate, as has become painfully clear to anyone who works on
Madison Avenue - or, to put it more precisely, to anyone who until
recently had worked on Madison Avenue.
That sinking feeling, which is increasingly pervading the American media
economy, is being reinforced by the first quarter earnings reports from
the giant agency companies. As a result, it's beginning to look a lot
like the r-word will soon start rearing its ugly head for the first time
in a decade.
Or will it?
A crunch of some numbers in the reports from the WPP Group and the
Interpublic Group of Companies would seem to suggest those who say the
glass is half empty are more on target than those who say the glass is
half full. As for those who say they don't even see a glass, they're
just Gloomy Glasses, er, Guses.
Both Interpublic and WPP were wounded by the weakening advertising
marketplace, the former possibly more than the latter. Interpublic
actually recorded a net loss in the first quarter, although it was
mostly attributable to a huge write-off (dollars 160.1 million) of
internet investments such as a stake in MarchFirst, which recently filed
for bankruptcy and is likely to be liquidated with stockholders getting
nothing for their shares.
Many Wall Street analysts, made nervous by Interpublic's missing their
estimates of first quarter results, cut their estimates for the rest of
2001. Typical was the reaction of David McMurry, who follows Madison
Avenue for Credit Suisse First Boston. 'IPG lays an egg,' he headlined
his analysis of the quarterly report, using the stock ticker symbol for
Interpublic and echoing a famous Variety headline about the stock market
crash that helped cause the Great Depression. Gee, isn't it a bad sign
when analysts are throwing around allusions to 1929?
WPP's results were in line with Wall Street expectations, but organic
revenue growth (minus acquisitions and currency changes) was a scant 6
per cent as the recent robust pace of new-business gains began to
McMurry, for one, had forecast 7 per cent.
WPP blamed the marked slowing of the American economy as the principal
reason for the shortfall, which was more apparent in the traditional
advertising realm than in the marketing services fields such as public
relations and healthcare communications.
Those grew quite nicely, indicating that results going forward might
improve because during tougher economic times marketers step up spending
in those areas if they decide to cut back their budgets for TV
commercials or print ads.
Omnicom, meanwhile, gave hope to the ad folks looking for silver linings
in all the clouds. Its first quarter report was nothing short of
'spectacular', McMurry raved, as he and other analysts were pleasantly
startled by the strength of Omnicom's performance. That was underscored
by Omnicom's reaffirmation of its previously disclosed target figures
for organic revenue growth of 12 to 14 per cent. (Compare that with WPP
above.) That means the top guns at Omnicom are undeterred by the
deterioration of the economy as evidenced by the aforementioned business
setbacks for the auto, airline and hotel marketers.
Wren-der unto Caesar indeed.