Strength in Media, Mixed Fortunes in America: How the Big Four Agency Groups Performed in Q4

Tim Cross 28 February, 2024 

Publicis Groupe CEO Arthur Sadoun said on an earnings call following the agency’s Q4 results that his company has “pulled away from the pack” of major agency holding groups, and he may well feel justified judging by this most recent round of financial results. The French group consistently delivered strong earnings last year, finding growth in markets and verticals where its competitors struggled, and this trend continued into Q4.

There were many shared themes among the big four agency groups – Publicis, WPP, Omnicom, and Interpublic Group. Media was a strong point across the board, while performance from creative agencies was relatively soft (though with some exceptions). Revenues from tech companies remained dampened. AI and data were still major strategic talking points. But there were also significant discrepancies – in how they’re approaching AI, how major markets performed, and their expectations for the year ahead.

Publicis continues to top the growth charts

Publicis once again delivered the highest year-on-year organic growth in Q4, with 5.7 percent. This rounded out a very strong year for the company, with full year growth of 6.3 percent. Omnicom wasn’t too far behind with 4.4 percent organic growth for the quarter.

Interpublic Group ranked third, with 1.7 percent growth. This was an improvement on previous quarters, but not enough to prevent a small full year decline of 0.1 percent. WPP on the other hand had relatively weak growth in Q4 compared to the rest of the year, with 0.3 percent growth in like-for-like revenues less passthrough costs in Q4, compared with 0.9 percent growth across the full year.

Mixed fortunes in America, growth in Europe

Looking at individual markets, there was consistency in some, and divergence in others.

The US in particular saw split performances. Publicis, which generated nearly two-third of its revenues in America last year, saw 6.1 percent organic growth in Q1. Omnicom and IPG managed to eke out marginal organic growth of 0.6 percent and 0.1 percent respectively. But WPP reported a 4.5 percent drop. These discrepancies sometimes come from business wins and losses (which by their competitive nature lead to gains for one group and losses for another. Publicis credited new business wins for its strong US performance, while WPP said weak spend from tech clients dented results.

WPP also had a tougher time in Europe than competitors. The British group saw an organic revenue decline of 0.8 percent in Western Continental Europe, with Spain down 9.2 percent and Germany down 5.3 percent. The UK and France however grew 5.1 percent and 4.5 percent respectively. Omnicom meanwhile posted 14.1 percent in European markets outside the UK, and 5.8 percent UK growth. Publicis reported 4.3 percent growth in Europe, and 4.2 percent growth in the UK. And IPG saw 11.7 percent growth in Continental Europe, but only 0.4 percent growth in the UK.

There were also significant discrepancies elsewhere. China returned to growth for Publicis, while the market was down 1.2 percent for WPP. India meanwhile had a very strong quarter for WPP, up 22 percent thanks to new business momentum. Omnicom posted 10.9 percent growth in Asia Pacific, while IPG reported a 1.5 percent drop. And Publicis reported 9.7 percent growth in the Middle East and Africa, while Omnicom saw a 17.3 percent organic fall in the same region.

Media remains strong, creative remains soft (but with exceptions)

One consistent across the agency groups was that media delivered growth, while creative agencies had a tougher time.

WPP’s GroupM for example saw 5.7 percent organic growth in Q4, while other global integrated agencies saw 1 3.4 percent decline. Omnicom’s advertising and media segment was up by 9.3 percent, led by growth in its global media business. And Publicis reported double digit growth in media, compared with low single digit growth in creative. IPG’s ‘media, data & engagement solutions’ unit actually saw lower growth than its ‘integrated advertising and creativity led solutions’ unit. But CEO Philippe Krakowsky said down to revenue falls from its digital specialist agencies – media saw “sustained strong performance”.

There were some exceptions on the creative side. IPG said FCB, its global integrated agency, performed well. WPP reported growth at Ogilvy (thanks to client wins) and Hogarth (due to strong spend from CPG companies). And Publicis said that creative agencies on the production side of things performed relatively well.

Tech spend stabilises, CPG grows

Low spend from tech companies and telcos has hampered agency growth across the year, and this continued to be the case in Q4. Tech was the only vertical which delivered lower revenues for Publicis (which only reported full-year figures), down three percent, while WPP’s tech and digital services revenues in Q4 were down 4.9 percent.

While executives on earnings calls were wary of predicting an imminent recovery in tech spend, there was talk of stabilisation in the sector, meaning we’re unlikely to see further continued significant falls next year (when results start being compared to those from 2023, which were themselves affected by low tech spend). A ramp up in marketing spend from tech companies could provide a welcome boost next year.

CPG meanwhile was a strong area across the agencies. CPG revenues were up 12.5 percent for WPP, while food and beverage revenues were up 19 percent for Publicis. Omnicom (which, like IPG, only reported what percentage of revenues came from each vertical) saw 1 percentage point growth in food and beverage.

Rapid AI investment, with notes of caution

Looking at the agencies’ strategic priorities, AI unsurprisingly remains high on the agenda across the board – though there are significant differences in how each group is approaching the area.

WPP and Publicis both spoke most clearly about their specific investment in AI technologies. WPP reiterated an earlier pledge to invest £350 million annually in proprietary technology to support its AI and data developments. Publicis meanwhile said it plans to invest €300 million in AI, separate from any M&A it may make in the area, as part of its three year plan “to train and upskill our people and shift the group organisation to an intelligent system,” according to CEO Arthur Sadoun. IPG and Omnicom meanwhile both spoke of continued investment in AI, though they didn’t name a figure.

Publicis focussed most on using AI to get the most out of its data. The company spoke earlier in the year about its plans to build the ‘intelligent system’ mentioned by Sadoun. Powered by an in-house ‘CoreAI’, this will unify all of Publicis’ proprietary data about content, media, and business performance, and make it more accessible and useful across the business. Publicis mentioned insight, media, creative and production, software development, and operations as five areas where it sees AI contributing.

IPG’s Philippe Krakowsky meanwhile said that AI investments will feed into further development of its addressable capabilities and data-powered tools. “Analytics teams as well as modelling and decisioning tools are core to all these efforts,” he said. “These are also areas where we continue to make investments in Artificial Intelligence.”

Krakowsky also said that the company is already using generative AI for personalised content across the marketing spectrum, and to generate content using a ‘brand’s voice’.

Omnicom’s John Wren spoke, as he has previously, of OpenAI’s integration into Omnicom’s internal assistant Omni Assist. “As the first holding company and second company overall to be giving full access to Open AI models in Microsoft Azure environment, we have a significant first-mover advantage, allowing us to experiment, prototype and launch applications within our platform before any other organization,” he said.

WPP’s Mark Read meanwhile spoke quite specifically about some of the opportunities created, and changes driven by, AI. On the new opportunities front, he spoke of AI consulting projects and tech projects for clients (which other holding companies are also pursuing), as well as opportunities for tech licensing fees. Read also spoke of AI driving a shift from FTE (full time equivalent) -based remuneration to a more output-based model.

An interesting theme across most of the agency groups was an acknowledgement of AI-related risks.

Mark Read spoke about Sora, OpenAI’s new text-to-video tool. And while he described the technology as impressive, he added that “what clients need is work that’s copyright-proof, that’s able to accurately represent their brands and reality. And Sora is not at that stage yet”.

John Wren was even more explicit about the risks of moving too fast with AI in general. “One of the immediate concerns we had [with AI is that] technology always travels faster than society’s ability to absorb it and the laws and regulations that generally follow it,” he said. “So making certain that we don’t expose our clients to anything that can create a problem because it was handled improperly, is key.”

And IPG’s Philippe Krakowsky mentioned work being done by its AI accelerator inside Weber Shandwick, which will “help our clients with technical and cultural issues related to generative AI, training marketers on the technology and ensuring they’re using the tools as effectively and ethically as possible”.

Selective approaches to M&A; breaking down barriers between media and creative

Outside of AI, a number of strategic priorities which have been recurrent in recent years came up again in Q4.

Breaking down barriers between sub-agencies and simplifying internal structures remains a theme, though much of the work here is now complete. Investments in first-party data capabilities, particularly in light of the upcoming removal of third-party cookies on Chrome, were mentioned heavily. And M&A is still on the agenda across the board, though executives spoke of being very targeted with investments, keen to avoid unnecessary bloat by skills, capabilities and teams which overlap heavily with what they already own.

One common theme across the holding groups was talk of breaking down barriers between media, data and creative. Publicis CEO Arthur Sadoun said that his group is increasingly infusing creative into its media pitches, which is leading to client wins. “Our strength is to connect data with creative, media, and technology like no one else.”

Competitors will take issue with that “no one else” line. WPP’s Mark Read said creative transformation, where the group will increasingly expand client relationships by pitching an integrated offering covering creative, media, production, and PR, as one of its more strategic pillars (alongside AI investment, repositioning around six internal brands, and driving cost savings through efficiency).

IPG’s Philippe Krakowsky meanwhile said that FCB’s integrated offering could provide a model for other creative agencies. “I look at the success we’re having with FCB, which is a traditional agency. It’s a very forward-thinking management team, and they have figured out a way to plug into the data layer for insights and to get very precise in setting goals for what they’re trying to accomplish with their clients, and then it’s integrated with other disciplines, in their case, very strong production.”

Retail media and ecommerce also got mentions across the board, though Omnicom gave the most focus here (which is unsurprising given its recent acquisition of digital commerce business Flywheel. Omnicom’s John Wren said this acquisition gives it a leg up on its competitors. “In January, we began combining Omni’s audience and behavioural data with marketplace point of purchase sales data in Flywheel’s Commerce Cloud, giving us an unmatched set of data not only to more effectively drive sales for clients, but to be fully able to measure return on advertising spend,” he said. “It’s a unique offering that no one has been able to achieve, and our competitors can’t match.”

2024 expectations in line with 2023

Looking ahead to full year projections for 2024, the holding companies are all expecting a fairly similar story to 2023.

Publicis and Omnicom, the stronger performers last year, expect more of the same this year. Publicis projected between 4-5 percent organic growth, while Omnicom forecasted 3.5-5 percent growth.

IPG expects an improved performance this year and a return to growth, though not a massive one. The agency projected between 1-2 percent organic growth next year. WPP meanwhile forecasted 0-1 percent organic growth for 2024.

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About the Author:

Tim Cross is Assistant Editor at VideoWeek.
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