Omnicom Sees 10% Revenue Growth in Third Quarter

CRM a Key Factor to Strong Performance

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New York ( -- Omnicom Group reported strong third-quarter results today, posting solid growth in both revenue and profits and an especially strong performance in its customer-relationship management operation.
The No. 1 agency holding company said revenue grew by 10% over the third quarter, to $2.7 billion, and net income grew 9.5%, to $177 million. The company's performance was bolstered by a customer-relationship-management segment that grew 16.7%, compared to advertising's 6.5% growth. That growth comes as marketers are increasingly interested in using digital media to create highly personalized communications with consumers.

Omnicom stock jumped about $4 on the results, taking shares to a late morning peak of $99.09, the highest point since April 2000. The stock remains below its all-time high ($107.50 in December 1999).

Bracing for Wal-Mart loss
In an otherwise upbeat earnings call, Omnicom President-CEO John Wren effectively braced his audience of analysts for the potential loss of GSD&M's Wal-Mart creative account, now currently in review along with media-buying, interactive, and Hispanic duties. Mr. Wren, when asked about the review by an analyst, said some of the $570 million in measured media spent by the retail giant "has a lot to do with a non-Omnicom company," referring to independent Bernstein-Rein, a longtime creative and media incumbent already knocked out of the review.

"Our exposure to Wal-Mart is more emotional than financial," Mr. Wren said. "So we continue to do everything [we can, but] it's always hard when you are already incumbent to be successful."

Teams led by Interpublic Group of Cos.' DraftFCB Group and the Martin Agency, as well as WPP Group's Ogilvy & Mather, are currently chasing the account, in addition to GSD&M. A decision could come as soon as this week.

PR gains
Omnicom's report also contained positive news about its PR operations, which in recent quarters had lagged both competitors and Omnicom's other business segments. PR revenue increased 13%, putting it more in line with rivals and Interpublic and WPP.

Mr. Wren praised the marketing-services agencies units in general. "They are all performing well. More specifically, our PR business are now performing at a level that we've been expecting for quite a while, and this is reflective of both the quality of these firms and the quality of their work," he said.

Omnicom leadership has given no explanation for its recent PR struggles. However, many industry observers have speculated that the operation has been hampered by the fact that two of its global PR units have been involved in high-profile crises of their own in recent years. Ketchum caught flack for paying a pundit to essentially produce Bush Administration propaganda for its Department of Education client, while Fleishman saw several ex-executives prosecuted for overbilling public agencies in Los Angeles.
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