With results published in the last week by the five major global marketing groups, there is hard evidence of revenue growth. And that growth is evident even after stripping out foreign currency movements and the impact of acquisitions.
Organic revenue growth, 9 months to Sept 2009
In the quarter to 30 September, WPP achieved "organic" revenue growth - that means revenue before taking account of acquisitions and foreign currency movements - of 7.5%, up from 4.1% for the year to date.
Publicis claimed organic growth of 9.2% (6.6% for the year to date). Omnicom did slightly less well, with organic growth in the third quarter of 6.7% (5% for the year to date), while Interpublic’s organic revenues spurted by 9.4% (5.2% for the year to date).
Havas had the least organic growth - 5.3% in the latest quarter and 2.9% for the year to date.
So the Bellwether report of expanding marketing budgets and ZenithOptimedia’s prophesy of a 4.5% year-on-year growth in advertising spend this year may not prove too far off the mark, notwithstanding the continuing economic uncertainty.
Where did the growth come from? Latin American and Asia Pacific seem to have been the best regions. Omnicom, Interpublic and WPP also enjoyed good growth in the United States in the latest quarter.
The global majors also found that the UK territory generated more growth than continental Europe. This growth may also have extended to domestic agencies, many of which have seen recent signs of improved financial performance (see UK’s public marketing agencies see profits rise 52%)
Nevertheless most groups are saying that traditional advertising spend is still in decline, whereas digital related activities are on the increase.
So where do we go from here? Will the UK Government’s hatchet men undermine a further recovery in marketing spend?
Experience supports the cynical view that change is always good for the communications industry.
Whatever the change, opinions need to be influenced. Every new policy needs to be explained and promoted. Every trashed policy has to be justified.
There’s also a cynical question-mark over the extent to which predicted change actually happens. Politicians and civil servants have a remarkable talent for modifying intentions when the implementation gets tough.
Nevertheless, it’s a fairly safe bet that there will be less cash around for both the public and the private sectors to spend in the coming year. People will delay buying decisions on non-essentials for the time being, and car sales may provide a useful barometer in this respect. However, we may see more being spent to promote value-for-money lines to consumers.
We should always remember that recessions provide opportunities as well as threats. In particular, strong companies have the opportunity to drive out weaker competitors.
So some well-heeled clients may take a very positive attitude towards increasing their marketing spend if it offers the chance to kill a competitor.
There will be winners and losers among clients and their agencies. The difficulty for agencies is that they are rarely in a position to choose their clients.
Bob Willott is editor of Marketing Services Financial Intelligence