Advertising: digital slowdown creates opportunity for trad ad agencies
The exponential growth in digital advertising seen during the pandemic has hit a brick wall. US tech groups Meta, Google, Snap and Twitter have produced a slew of weaker figures.
Bad news for pure-play digital ad platforms may be good news for old-school advertising agencies. Three of the sector’s biggest — Interpublic and Omnicom of the US and France’s Publicis — recently raised their forecasts for annual organic revenue growth last week. UK giant WPP will report on August 5.
Recession fears have prompted companies to curb online ad spending. Snap shares tumbled almost 40 per cent after it posted its weakest quarterly sales growth as a public company. Worse, the maker of disappearing message app Snapchat said it had seen no growth in the current quarter.
The denizens of Madison Avenue, Soho and the Champs-Elysée are not immune to a downturn. They now mix digital advertising work with the traditional kind. Jitters are reflected in share prices. Year-to-date losses are up to a fifth for the largest groups.
But the sector looks less exposed than the tech giants. Both Apple and Google have introduced new privacy features that make it harder for advertisers to harvest data for targeted ads. This has reduced the ability of brands to see what punch their ad spending packs.
Some have turned to traditional ad agencies for help. At Omnicom, organic revenue for its advertising and media business rose 8 per cent during the past quarter. The figure for precision marketing, which helps clients reach consumers directly through digital platforms, increased more than a fifth.
Ad company investment in first-party data has added to their appeal. Publicis, which owns agencies Saatchi & Saatchi and Leo Burnett Worldwide, bought Epsilon for $4.4bn in 2019. The company uses its own pool of data to help brands identify and reach new customers. This followed IPG’s $2.3bn deal for a similar business a year earlier.
Digital advertising will continue to gobble up big chunks of ad spend. But traditional agencies are proving more resilient than pessimists imagined.
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