Global agency groups Q3 2023 report card: Performance ‘not up to standard’ for some

Revenue declines at half of the “big six” holding companies between July and September have prompted a $125.37 million (£100 million) savings programme at one agency group, while the boss of another said performance was “not up to the standards” required.

Organic revenues decreased year-on-year at Dentsu (-6%), WPP (-0.6%, expressed as revenues less pass-through costs), and Interpublic (-0.4%) in the third financial quarter.

But the other three global agency groups posted organic revenue increases, which were generally better than expected. Publicis Groupe achieved a 5.3% boost–building on 7.1% growth in the first six months of the year. Havas recorded 4.5% Q3 growth while Omnicom achieved a 3.3% rise.

Performances soared and dived on the relative success of media networks, exposure to budget cuts from tech clients and the strength of services offering data and digital transformation, Campaign's analysis of the latest holding company financial results has shown.

Pullback by tech clients has continued beyond the first half of the year–with WPP particularly hard-hit by a 13% YOY decline in spend in Q3. The holding company’s chief executive, Mark Read, noted that meant the spending was "down by more than it was in Q2 [9%], and that's inevitably had an impact on the top line."

Announcing its overall organic revenue decline of 0.6%, WPP responded with plans to carry out a £100 million savings programme by 2025, through a new operating model at Group M and the merger of VMLY&R and Wunderman Thompson to create VML.

Dentsu also reported a similar scenario. "Our third-quarter performance continued to show the impact of the reduced spend from clients in the technology and finance sectors, as well as project delays within customer transformation and technology," Hiroshi Igarashi, chief executive of Dentsu, said.

Admitting that its results were "not up to the standards we’ve set over many years", IPG's chief executive, Philippe Krakowsky, said that growth was hit by lower spending from tech and telecom clients in the US, which accounts for 65% of revenues, and underperformance at its digital specialist agencies, R/GA and Huge.

Media success continues

Publicis chief executive Arthur Sadoun cited the success of the agency’s media operations, which increased revenue in "the high single-digits", and data unit Epsilon (up 10.5%) as significant reasons for the holding group’s unexpected level of overall organic growth. Media client wins included Pfizer, LVMH and Kimberly-Clark in the US.

However, cuts to “classic advertising” by clients contributed to “low-single digit” revenue growth among the holding company’s creative agencies, Sadoun said.

Three divisions at Omnicom experienced notable revenue increases; advertising and media (6.1% to $1.9 billion), precision marketing (4.3% to $383.7 million) and healthcare (3.8% to $341.8 million). Meanwhile, experiential jumped 9.2% to $133.3 million.

John Wren, chief executive of Omnicom, which beat forecasts in Q3, said: "We are very well positioned for a recovery in business conditions, with a strong balance sheet and leading creativity in all of our service disciplines.”

Vivendi-owned Havas pointed to a “spectacular” 51.1% revenue surge in Latin America, thanks to a strong market position and legacy in media buying, but also growth in every region, as the reasons for its success in the three-month period.

For the first nine months of 2023 Havas achieved a 4.3% organic increase after the deduction of pass-through costs–which the agency’s chief executive, Yannick Bolloré, said was unexpected.

He told Campaign: “Being transparent, I was not that confident [at the start of 2023]. If you had told me in January that we would have reached more than 4% accumulated organic growth after the first nine months, I would have been very positively surprised.”

Growth slowdown in UK

In the UK, Q3 year-on-year organic revenues rose at Publicis and Omnicom, by 10% and 4.4% respectively, but for Publicis this was a slowdown on the 17% it achieved in Q2.

Similarly, WPP’s 1.1% UK growth in this latest financial quarter was down on the 9% achieved in Q2. Though IPG’s 2.2% UK growth was up slightly on the 1.7% posted in Q2.

Havas and Dentsu didn't report UK-only figures, but growth in Europe at Havas was 1.5% for Q3.

Dentsu recorded a year-on-year slump in organic revenues in Q3 in EMEA, of 17.2%, due to declines in its customer transformation and technology division, relating to client losses in the first half of 2023, plus the impact of lengthened sales cycles.

Looking ahead, predictions from "big six" leaders for 2024 were mixed but caution was a common theme. Havas' Bolloré remained "cautiously optimistic" that 2024 will be another year of growth – "maybe not as spectacular [as this year]. But I would have said the same a year ago about 2023," he said.

IPG's Philippe Krakowsky noted the Israel-Gaza war was likely to lead to uncertainty among clients, while also pointing to wider ongoing economic instability, which has translated into “what is now an unmistakably more cautious tone in the business."