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I must admit that I was one of the many relieved to say good bye to 2009. For many of us working in the Agency game, it was by all accounts a tough year. However, as the 2009 financial results start to be announced, I am expecting it could have been much tougher for some.
Havas and Omnicom are just two of the 4A Agency's that saw drops in revenues. For Havas, they experienced a year on year drop of 8.1% and Omnicom’s revenues dropped by 12.3%. Clearly, it was a bad year for Agency's but the percentage of the revenue drop surprised me. We need to wait for the other 4A major's to announce to get a better picture on the broader issues. So where did it all go wrong last year? Where these results just a reflection of the Global Financial Crisis (GFC) or is it more fundamental. Are the old ways of the doing business as an Agency becoming difficult to sustain in the era of digital?
In the Havas announcement they tried to portray the positives by highlighting the many win's they saw but the fact remains- they saw a year on year drop of 8.1%. Similar for Omnicom’s results. They showed a fall in post-tax profit – down by nearly 21% at $793 million. Operating profit margins were lower (11.7%) and interest charges were substantially higher than in 2008.
I wonder what the future holds for large 4A Agency groups. By all accounts they do a great job in promotion their clients- providing a wide range of advertising and marketing services. But it is the basic model that I wonder about.
As an outsider looking in, it appears that the many smaller agencies within the same Group all compete for similar clients and the cultures of the business conflict with other parts of the same group. Clearly, this is something most 4A's are trying to address. For example, Publicis Groupe launched VivaKi to leverage the combined scale of Digitas, Starcom MediaVest Group, Denuo and ZenithOptimedia to develop and leverage digital.
The agency business model has been under assault for the past decade, and last year’s economic crisis only underscores the critical changes that agencies must make in terms of their business model, the way that they provide services, and—most importantly—the way that they make money. The corporate restructuring and organizational changes are happening with the Agency's... I guess we will see if the growing 2010 economy provides the leeway for the 4A's to make the necessary changes while they continue to operate their business's and grow revenues.
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Source: Yahoo Finance
Written on Thursday, 11 February 2010 06:42 by Matt McDougall
