INSIGHTanalysis: Media Healthcheck – February 2004

Omnicom, which owns BBDO Worldwide and TBWA, said that its worldwide revenues rose by 18.3% during Q4 2003. Across the full year they were up by 14.4%. Omnicom says that the US market is recovering well, with increased client spending and merger activity expected to have a positive impact. The UK, Asia and South America are showing signs of modest recovery, whilst Continental Europe is stabilising, but has not yet reached the point of recovery.

WPP‘s Sir Martin Sorrell – the most venerable of prognosticators – decreed that an end to the worst advertising downturn in memory is now in sight. His company, which owns J Walter Thompson, Ogilvy & Mather and Young & Rubicam, saw pre-tax profits jump by 18% last year. Along with other market commentators, Sorrell expects the quadrennial effect of the Olympics, US elections and European Championships to boost spending this year.

Martin Sorrell has been describing the downturn and its subsequent recovery as bath-shaped. This is a reference to the growth rates as plotted on a line graph: a gradual decline, followed by a longer period of negative growth and finally a gradual improvement. It is perhaps a cause for minor celebration then, to hear him announce in February that ‘we are definitely out of the bath’.

Havas was more cautious. It says that the current advertising climate is ‘certainly more auspicious than 2003’, although it remains unclear whether a global recovery is on its way.

Aegis, owner of Carat, is more ebullient, saying that advertising is now back into the cycle of positive growth. It says that the advertising recession, which ended in the US and Asia in 2003, is now largely over in Europe, although France and Germany are set to recover at a slower rate. Clients are now indicating their intention to invest in top line growth on the back of rising corporate confidence.

Aegis forecasts that global ad expenditure will rise by 5.3% in 2004; the US market is expected to grow by 5.3%, with Europe rising by 4.0% and Asia-Pacific up by 6.1%.

Account and corporate activity Lehman Brothers‘ most recent New Business Scorecard shows that account activity increased again during February, with further reviews upcoming.

Analysts say that the review pipeline is accelerating as advertisers continue to shift their focus from costs to growth. The review pipeline was up 14% on January to the highest level yet recorded by the survey. The indications are of an ever-improving outlook for the industry which should soon start to positively impact on agency revenues.

Another positive sign is that corporate activity is expected to heat up this year, according to a report from PricewaterhouseCoopers. It says that there will be more than 100 mergers and acquisitions in the European media sector, valued at more than ₏20 billion. Encouraged by the general market recovery, M&A has found itself back on the corporate agenda, says PwC.

US 2003 adspend figures US adspend rose by more than 5% during 2003, according to Nielsen Media Research, with local media showing the greatest increases throughout the year. The prognosis for the coming year is of continued health, according to managing director of Nielsen Monitor-Plus, Jeff King:

“Although this accelerated growth rate may be difficult to sustain, we also expect a strong advertising market in 2004, which will be supported by political advertising and the Summer Olympics in Athens.”

Separate figures from TNSMI/CMR put total US advertising growth at 6.1% during 2003. The group says that expenditure was not adversely affected by the war in Iraq.

The UK market ITV says it has seen ‘positive signs’ in the market and analysts at Merrill Lynch have upgraded their full year 2004 ITV revenue growth forecasts from 2.1% to 2.5%; a rise of 8.0% is predicted for Q1 2004.

SMG said that the quality and consistency of bookings for the first four months of 2004 are encouraging and it is seeing growth in each of its media sectors (television, radio, outdoor and cinema). However, it adds that the market remains relatively short-term.

At Pearson‘s Financial Times there were also some improving indicators for the first couple of months of the year, following deepening losses at the paper as the result of a ‘savage corporate advertising recession’.

The Technology, Media and Telecommunications (TMT) FTSE shares index rose by 0.9% during February 2004 as shown.