Omnicom Group's fourth-quarter profit grew 10.3% to $271.9 million from $246.5 million, the company announced today. Year-over-year profit increased 15.1% to $952.6 million from $827.7 million in 2010.
The results are positive coming off a difficult couple of years for the ad business in 2010 and 2009, when the recession led to client pullbacks in marketing spending and a reduction in the workforce at many agencies.
Omnicom's worldwide revenue for the fourth quarter of 2011 grew 7.4% to $3.85 billion. Domestic revenue for the quarter increased 5% to $1.93 billion from the year-ago quarter, and international revenue jumped 9.9% to $1.92 billion from the fourth quarter of 2010.
Worldwide revenue for 2011 grew 10.6% to $13.87 billion. Domestic revenue for the year increased 5.5% to $7.05 billion from the previous year, and international revenues were $6.82 billion, up 16.5% from last year.
On a conference call with analysts this morning Omnicom Group CEO John Wren credited an "exceptional list of clients," along with the creativity of the staff at Omnicom agencies, for the performance. "We end the year extremely well-positioned for future growth," Mr. Wren said.
The elephant in the room was trouble with key client PepsiCo. Mr. Wren didn't refer to the beverage and snack giant's announcement of massive changes in the way it works with agencies. But departing from his usual format for earnings calls, the executive pointed out a campaign for Pepsi , "Bringing Happiness Home," of which he's especially proud. It was created for the Chinese market in honor of the Lunar New Year.The 10-minute movie, combining advertising for Pepsi , Lays and Tropicana, has been viewed more than 100 million times in the past couple of weeks, according to Mr. Wren. "That is what you call earned media," he said.
Mr. Wren touched on a number of other subjects, including the challenges of the European market, where economic uncertainties have negatively affected business. The economic situation there is partly responsible for Omnicom's strategy in the past few years to increase its business outside of the U.S. and the U.K.
Omnicom made acquisitions in India, Turkey and South Africa last year. During the call, Mr. Wren signaled that the company would continue to invest in other markets to expand its geographic footprint.
It will also keep investing in digital, social, mobile and analytics, but organically rather than via acquisitions. In keeping with its build-vs.-buy model, Omnicom will invest in agency talent and training. "All of our agencies must have strong digital capabilities to compete in the future. ... We are helping, and pushing, where needed," Mr. Wren said.
Revenue generation was almost evenly split between brand advertising and marketing services. In the latter bucket, CRM and event marketing performed well, the company said, while PR was only "marginally positive" and health-care marketing has been a problem because of regulatory issues and reduced spending. The company said difficult sectors the past year included pharma, travel and entertainment.
Omnicom seems confident that client spending is rebounding overall and that any continued uncertainty in the financial markets won't significantly affect agencies this year.
"Clients, I believe, are going to spend more money, and they want to spend it in the most efficient and targeted way," said Mr. Wren, adding that there is more pressure on ad agencies to prove return on investment.