Advertising giants such as WPP Group and Interpublic are set to become winners as 2004 advertising spend shapes up to be the strongest in some time, says a new report.
Like other commentators, the report by New York research group Fitch Ratings says ‘bulge-bracket’ advertising groups will reap the benefits of ad spending on the Athens Olympics, Euro 2004 and the US Presidential elections. Higher GDP growth rates are also expected to have a beneficial effect.
Fitch notes that although the 30-second network television spot is still the primary vehicle for mass marketers, audiences are moving away from network television and towards cable networks, the internet, and video games. To combat this the global holding companies are becoming more involved with the development of television shows to help ensure product placement.
Karen Ghaffari, senior director at Fitch, said: “The global holding companies’ ability to adapt to this changing environment will be a determining factor in how these companies perform over time.”
This latest report backs up Sir Martin Sorrell’s up-beat announcement made in February when he posted that WPP had made a solid 18% pre-tax profit for 2003 (see WPP Takes Bullish Stance As Pre-Tax Profits Rise).
Fitch Ratings also predicts that mid-size companies such as Havas will face a tough year. Mergers and acquisitions will be on the cards if they are to compete with the larger companies. There will be moderate mergers and acquisitions activity, with the global holding companies, such as Omnicom, Publicis and WPP, engaged in ‘discretionary acquisitions’.
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