The ad, marketing and media industries are rife with issues as technology changes the way people consume, create, place and track ads. At the same time, change in the European Union and economic and political turmoil are creating uncertainty for global marketers. Today, Omnicom leaders addressed all of these issues -- and their impact on the ad services holding company -- during the company's second-quarter earnings call.
Media spending trends
"There's growth in digital media despite concerns around viewability and fraud," said Omnicom CEO John Wren on the earnings call. Still, there's a slowdown in growth, added Daryl Simm, CEO of Omnicom's media agency network, which houses shops like OMD and PHD.
Some advertisers, while continuing to grow digital budgets, are "tapping the brakes" as they react to concerns around viewability and fraud, said Mr. Simm. "What you're seeing is a general concern among some advertisers that cause the tapping of the brakes," he said in response to an analyst's question. "While the issues may exist in some [media] pockets more than others, it does soften the overall growth of the category."
Mr. Wren also addressed the need for change in how digital campaigns are measured. "There's a growing feeling on part of big advertisers that you can't grade your own homework when it comes to measurement," said Mr. Wren. "With more money dedicated to digital, new standards are going to have to get agreed to so they can measure the ROI."
Meanwhile, there's a stronger upfront TV market, with pricing up double digits, said Mr. Wren. "These increases, while good for the TV business,don't correlate to an increase in revenue to us."
Part of the double-digit increase in upfront TV pricing is due to advertisers wanting to spend more in the upfront to avoid paying big premiums they paid during the scatter last year, said Mr. Simm. Other factors contributing to price increases include "a pattern of diminished audience" leading to less supply and concern around digital spending.
Concerns around the issue of media agencies collecting rebates in the U.S. also dominated the call, which comes only a month after the Association of National Advertisers published its report summing up an investigation into the issue. Mr. Wren emphasized the company's compliance controls and adherence to its policy not to collect rebates in the U.S. He also pushed for the resurgence of a joint task force and set of principals between the dueling advertiser and agency trade associations. However, he did say that the collection of rebates was woven into one Omnicom global client contract.
"Our U.S. media agencies don't seek or retain rebates, and return to clients all value negotiated in the form it is received," he said. "In the case of one global digital media provider [with] an incentive provision in our agreement that includes the U.S., it continues to be returned to all clients in the U.S., on a prorated basis according to their spending with this provider."
When asked if the report impacted the agencies' contract negotiations, Mr. Simm said, "There is more scrutiny in the area naturally, but the contracts that are written between ourselves and clients, as you might expect, are comprehensive in nature and we don't see any changes."
International political and economic turmoil, as well as Great Britain's decision to leave the European Union, has nearly every global entity asking what it means for their international holdings. Adland's agency giants are no exception.
While it creates uncertainty and a slowdown in decision-making in some markets, it's still too early to know what the impact of Brexit will mean for the ad market in Europe, said Mr. Wren. "The biggest impact was when we were in Cannes," he said. "Everyone from the U.K. there went to bed thinking the vote would fail, and it passed, so there's a bit of uncertainty."
Still, he reassured analysts and investors that Brexit shouldn't disrupt the business abroad. "We're represented everywhere, so if there's a shift from one market to another we can easily follow and pick up without any real disruption to our business."
Events, which the company supports through its CRM division, took a hit in the second quarter following cancellations in places like the Middle East, where oil has been down. And with a string of domestic and international terrorist attacks, clients are more cautious, said Mr. Wren. He's confident that will change.
In brighter news, Omnicom's string of new-business wins will begin producing revenue throughout the year and into 2017. "There's normally at least a 90-day lag between winning the business and seeing the first dollar of revenue," said Mr. Wren. Omnicom will begin seeing results from last year's Procter & Gamble media-agency win in July. PHD's Volkswagen media win won't show results until early 2017. PHD also won the Delta and Carnival media assignments.
Last quarter, Mr. Wren had predicted a new $4 billion in new business billings for the year. He said that now he's "even more comfortable with that prediction."
Creation of new networks
Earlier this year, Omnicom created a new umbrella group for its PR agencies, including FleishmanHillard and Ketchum, as well as for its healthcare offerings. Months after the formation of the umbrella groups, the PR group acquired health shop Rabin Martin, and the health network acquired pharma and biotech firm Biopharm communications.
Now, the holding company is in the process of creating a network for its U.S. agencies that operate independently within the holding company, including Goodby Silverstein & Partners, GSD&M, Martin Williams and Zimmerman.
"While they'll continue to go to market as independent brands, we believe placing them in a singular group provides benefits for sharing of best practices, management and operations," said Mr. Wren.