The Big Four in Q4: Where Did the Holding Groups Find Growth?

Tim Cross 02 March, 2022 

When VideoWeek started profiling the big four holding groups’ quarterly earnings in April last year, the results were marked by a “cautious return to optimism”. Some brand sectors which had paused spending at the start of the pandemic had started to advertise again. All of the big four – WPP, Publicis, Omnicom and IPG – posted low organic year-on-year growth. A few dared to forecast positive growth across the whole of 2021.

Now nearly one year on, the picture is very different. Not only have all four agency groups fully recovered from the pandemic and beaten their early expectations for 2021, they’re now all forecasting mid-single digit growth for this year too. This represents a significant turnaround from pre-pandemic years, when growth was sometimes hard to come by.

But where exactly are the agency groups finding this growth, and where are they investing for the year ahead? Here’s are breakdown of the big four’s earnings:

IPG leads the way in organic growth, Omnicom becomes the biggest of the big four

After a few months in which the holding groups’ figures for year-on-year organic growth varied wildly, this changed in Q3, when the spread was just 4.5 percentage points.

The gap between first and last place became even narrower in Q4. IPG led the way, reporting organic growth of 11.7 percent for the quarter. WPP was next, reaching 10.8 percent like-for-like revenue minus pass-through costs. And Omnicom and Publicis were close behind, with 9.5 percent and 9.3 percent organic growth respectively.

In Q3, one of the major stories was Publicis claiming WPP’s crown as the largest holding group judged by market valuation. Now Omnicom has overtaken them both. Omnicom’s market cap is now over $17 billion, compared with Publicis and WPP which sit at $15.7 billion and $15.5 billion respectively (using current share prices and exchange rates).

Strong growth in non-US/EU markets

As has been the case in previous quarters, the agency groups were split over whether they found stronger growth in the US or Europe.

WPP and IPG were both generally stronger in the US than in Europe. WPP posted 11.7 percent growth in the US, compared to 9.9 percent in the UK and 3.4 percent in Germany. IPG meanwhile posted 12.1 percent growth in the US, compared with 6.2 percent in the UK and 6.0 percent in continental Europe.

For Omnicom the opposite was true. Organic growth reached 10.1percent in the UK and 12.7 percent for continental Europe, compared with 7.8 percent growth in the US.

Publicis was evenly split, posting equal growth for North America and Europe of 8.7 percent.

Unsurprisingly all of the holding groups posted their highest organic growth figures in markets outside the US and Europe.

Latin America stood out for Publicis and IPG, which posted 22.6 percent and 22.5 percent organic growth for the region respectively. And Asian markets continued to deliver strong results too – IPG recorded 22.5 percent growth in APAC, while WPP reached 13.6 percent organic growth in China.

Omnicom’s strongest growth was found in the Middle East and Africa, which reached 48.1 percent organic growth.

Data continues to deliver, experiential joins the party

Digging into the specific business areas which are delivering growth, the holding companies continued to report that their investments in data and technology are paying off.

WPP’s CEO Mark Read cited Choreograph, the data unit launched last year, as contributing to account wins. Publicis Groupe said data technology business Epsilon delivered 12.8 percent growth. And IPG’s CEO Philippe Krakowsky said his company’s agency brands “increasingly tapped into IPG’s foundational technology and data layer” during the quarter, helping to deliver growth.

Strong performance of experiential marketing and commerce were other common themes. WPP reported that the three growth areas of experience, commerce and technology accounted for around 38 percent of revenue less pass-through costs across its global integrated agencies (excluding GroupM). Omnicom said that experiential revenues grew 56.7 percent year-on-year during the quarter. And both Publicis and IPG referenced growth in commerce.

Omnicom and Publicis were united in reporting strong performance from their digital transformation consulting businesses. Omnicom said that Omnicom Precision Marketing, which offers martech and digital transformation consulting as well as decision sciences, customer experience design and targeted customer marketing programs, was crucial for a number of new business wins during the quarter. Publicis meanwhile said that Publicis Sapient, its digital transformation business, grew 13.8 percent during the quarter.

For WPP specifically, PR was a highlight of the quarter, delivering 15.1 percent year-on-year growth following the merger of its PR brands Finsbury Glover Hering and Sard Verbinnen.

Technology and retail brands lead spending growth

Across the big four, revenues from the vast majority of brand segments have increased over the past year.

Technology and retail brands were two of the strongest growing brand categories. For Omnicom, technology was the only brand segment where revenues grew as a proportion of the agency group’s total income. WPP meanwhile reported 17.1 percent growth in revenues from tech and digital services clients, while IPG also listed tech as one of its strongest growth segments.

Revenues from retail brands meanwhile grew by 14.1 percent for WPP, grew by 12 percent for Publicis, and reached double-digit growth for IPG (which didn’t give an exact figure).

Financial services appear to be the weakest performing brand segment overall. Financial services was the one industry where revenues actually fell for WPP, by 0.3 percent. Publicis reported five percent growth for the segment, the lowest out of any brand category it reported. And financial services made up a lower proportion of Omnicom’s total revenues compared with Q4 2020.

Metaverse gets a name check in growth plans

Looking to the holding groups’ strategic priorities, further investment in data continues to be a common theme. WPP plans to continue to invest significantly in Choreograph. Omnicom’s John Wren said his company is “increasing our investment in such areas as AI and automation, e-commerce, performance media, data and analytics”. Publicis listed “leveraging our unique assets in data and technology for all of our clients” as one of its three major priorities for 2022. And IPG said its data capabilities will help to provide a strong foundation for further growth.

Increasingly the focus is less on creating – or buying – new businesses or tools which specialise in data (though acquisitions definitely aren’t off the table). A big priority now is making sure all agencies within the holding groups are able to properly leverage these data tools.

A quote from IPG’s Krakowsky, delivered on the earnings call, sums the trend up well. “Much of our growth in the quarter and the year was fuelled by disciplines and client sectors that most actively tapped into our technology layer, whether that’s data capabilities, analytics or precision marketing,” said Krakowsky. “We see significant opportunity for more of our creative agencies and our marketing services specialists, which is live events and sports marketing, to be a part of this connected ecosystem. This will help a broader range of our agencies make their thinking and their work, more fully informed by a deep understanding of audiences.”

This also plays into another common theme across the agency groups of breaking down barriers between agency groups and simplifying the overall organisational structure. Omnicom’s John Wren said part of the motivation of this strategy is to encourage clients to consolidate more of their business within one holding group. “These are significant growth opportunities for us where our suite of services, creativity and culture of collaboration, all supported by Omni [Omnicom’s data insights platform] give us a competitive advantage,” said Wren.

M&A also seems to be on the cards for the year ahead. Omnicom’s Wren said he’ll be looking at factors which drove client wins in 2021 to inform M&A during 2022. IPG’s Krakowsky said he’ll be “focusing on opportunities that are consistent with strategic growth areas, especially in connected commerce and digital consumer experiences” when considering mergers and acquisitions. And Publicis Groupe’s Arthur Sadoun said he’ll be looking for deals which will expand the agency’s data and tech capabilities.

The metaverse also got a mention from a couple of the CEOs. WPP’s Mark Read referenced the launch of The Metaverse Foundry within WPP, which will be available to all WPP clients and agencies, as one strategic priority. And Omnicom’s John Wren referred to the metaverse as a “high growth opportunity”.

Mid-single digit growth expected for 2022

Finally, looking at growth expectations for the year ahead, all four holding groups are pretty much aligned.

WPP and IPG both forecast five percent organic growth for the year ahead. Publicis expects a marginally more conservative 4-5 percent organic growth. And Omnicom predicts a slightly more optimistic 5-6 percent organic growth.

It’s worth bearing in mind that with the exception of WPP, all of these forecasts were delivered prior to Russia’s invasion of Ukraine. WPP’s Mark Read said it was too early to judge the wider economic fallout from the invasion, though added that Russia accounts for less than one percent of global advertising spend, so the direct impact should be small.


About the Author:

Tim Cross is Assistant Editor at VideoWeek.
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