U.S. Market Shows Steepest Decline; No Relief Seen

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NEW YORK (AdAge.com) -- In a difficult third quarter, Havas Advertising's revenue dropped 4% to $397 million from the same period last year, after factoring out acquisitions and currency fluctuations.

The steepest decline was an 8.1% revenue drop for the company in the U.S. market, which accounts for 45% of Havas' revenues. Overall, revenue from traditional advertising fell by 7.3% during the third quarter, while revenue from Havas' better-performing marketing services and media operations declined by just 1%.

Bob Schmetterer, chairman-CEO of Euro RSCG Worldwide, said that fee pressure has increased this year, mainly driven by corporate profitability concerns among clients. Pressure has been more intense in traditional advertising than in marketing services and media, where effectiveness is easier to measure, he said.

Flat revenue expected

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Alain de Pouzilhac said he expects Havas' revenues to be flat this year while the ad industry will decline about 4%. He predicted that in 2002 Havas' revenues will grow between 2% and 4% but that industry ad spending will decline again, by about 2%.

"Our hypothesis is that it will be the first time in over 50 years that two consecutive years will be negative," Mr. de Pouzilhac said.

Havas' revenue for the first nine months of 2001 was $1.37 billion, showing organic growth of 2.9%.

"We think the recession started in the U.S. at the end of March, and Europe will be six months after, so we are not too optimistic about the fourth quarter," Mr. de Pouzilhac said.

Group breakup almost complete
He said Havas is completing the previously announced breakup of its Diversified Agencies Group, which accounts for about one-quarter of Havas' revenues. He said that 55% of the group's revenues will move to Euro RSCG Worlwide, Arnold Worldwide Partners and Media Planning Group.

Companies representing another 36% will remain independent, including public relations agencies, human resources and various marketing support agencies. Most of the remaining companies will be sold. The 10 staffers involved in running the group, including Havas Vice Chairman Jean-Michel Carlo, have already left.

Arnold, whose $3 billion in billings are less than one-quarter of Euro RSCG's $13 billion, is likely to get more of the Diversified Agencies Group than Euro RSCG or Media Planning Group.

Havas will announce this week how the Diversified Agencies Group agencies will be divided.

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