OPINION: Stuart Elliott in America

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.


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