The world's two largest holding companies, WPP Group and Omnicom Group, said direct marketing, public relations and promotions helped boost their strong 2000 results. Others, including Interpublic Group of Cos. and True North Communications, are expected to release similar statements this week. Whether the holding companies will continue to report gains this year may depend on how their agencies perform outside the U.S. and how effectively they're able to grow in marketing disciplines beyond traditional advertising.
Omnicom posted a 19% increase in net income and 20% increase in revenue for the fourth quarter, thanks largely to the U.S. market. Net income rose to $142 million, from $120 million in the same period in 1999. Revenue rose to $1.8 billion, from $1.5 billion. U.S. revenue for the quarter rose 37% to $960 million, while international revenues rose just 5% to $843 million. Net income for the 12 months ended Dec. 31 rose 37% to $499 million, while revenue rose 20% to $6.15 billion.
Randall Weisenburger, Omni-com's chief financial officer, noted traditional ad revenue-which makes up 44% of Omnicom's revenue-rose 12% in 2000, while revenue from other marketing activities rose 27.1%. Mr. Weisenburger said Omnicom will start reporting direct marketing and promotion results together in the first quarter.
At a recent analyst meeting, Interpublic Chief Financial Officer Sean F. Orr also stressed that revenue growth opportunities are in the nontraditional ad sector, which he touted as "a more recession-proof proposition than traditional advertising."
While he acknowledged "contrary emotions" among clients going into 2001, Mr. Orr said fourth-quarter new-business gains were "encouraging," citing wins by Interpublic's McCann-Erickson WorldGroup, Campbell-Ewald, Campbell Mithun and Hill Holliday Connors Cosmopulos. Interpublic will release its results Feb. 27; True North will report on March 1.
"The first half of this year is going to be difficult for everybody," Omnicom CEO John Wren warned analysts. But he added the strengthening overseas economies may help alleviate the pain of a slower U.S. market.
WPP Group also posted strong results for 2000. Revenue for the year advanced 37% to $4.52 billion; profits rose a record 43% to $554.5 million, adjusted to reflect the October acquisition of Young & Rubicam.
WPP management forecast a revenue increase of only 7% in 2001 over 2000 when preparing budgets for 2001. But it said early indicators show 2001 ad and marketing spending growth worldwide won't be significantly behind 2000, thanks to stronger economies
outside the U.S. and Western Europe. Those outside markets now account for 18% of WPP's annual revenue.
Net new billings for the year were up 15% to $4.5 billion, with Young & Rubicam contributing $890 million in net new billings. Interactive and nontraditional media made up 54% of the company's revenue in 2000, including Y&R's results for the full year. But Y&R Advertising, New York, the flagship of the Young & Rubicam network, suffered account losses in 2000 that dulled its record. While Ogilvy & Mather Worldwide
had net new billings of $850 million and J. Walter Thompson Co. $615 million, Y&R showed only net new billings of $46 million, hardly better than the $21 million posted by the much smaller Red Cell network.