ANALYSIS: Omnicom's John Wren on what lies ahead for advertising

Chris Pash
By Chris Pash | 30 July 2020

Omnicom CEO John Wren has added his voice to the many who, using current signs and data, see the June quarter as the bottom of the economic trough created by the pandemic.

“Based upon current marketing conditions, we think the worst is behind us with Q2 being the low point for year-over-year revenue declines in 2020,” Wren says.

Arthur Sadoun, releasing Publicis Groupe’s second quarter results last week, also expressed the view that this could well be the low point of the slide.

And overnight IPG's Michael Roth, releasing second quarter results, said there had been initial signs that the second quarter would prove to be the bottom of the economic decline.

The industry in general wants to forget the first six months of the year and looks to the second half for some improvement in business.

But the three global holding company CEOs note the uncertainties in the market. They see an uneven recovery, with some sectors and countries getting ahead faster than others.

In the second quarter, Omnicom’s revenue dropped by almost a quarter to $US2.8 billion, a point lower than expected by a majority of market analysts.

“The most drastic change we saw actually occurred in March,” says Omnicom's Wren.

“There hasn't been a discernible marked difference in what happened in April, May and June. There were some differences but not enough, for me, to declare a trend.”

Omnicom’s clients in industries such as travel, lodging and entertainment, energy, non-essential retail and the auto industry cut costs quickly in the second quarter, including postponing and/or reducing marketing spend.

Clients in healthcare, pharmaceuticals, technology and telecommunications have fared better.

Omnicom also moved to cut costs, which will amount to around $US500 million a full year.

Much of the cost savings came from headcount reduction. Many of the 6,100 redundancies were in the US.

“The only way people could get the benefits the government was offering was to actually make them redundant, that's what we did,” says Wren.

Many who stayed took voluntary pay cuts to preserve jobs.

And as business improves, the majority of those salary cost savings will come back.

Looking at China, which locked down first and returned first, Wren confirmed a pickup in business there but this had been subject to “open and closed partially and open and closed partially”.

And he says the same could be applied to Australia but not to the point that he could “predict with any confidence” what is going to happen.

“Visibility has improved in the past couple of months, but remains low as we and our clients consider the continuing effects of COVID across markets including the possibility of second waves, the effects and timing of government stimulus programs, changes in consumer habits and spending and the overall rate of economic recovery,” Wren told analysts in a briefing.

“With that in mind, our agencies have developed their second half plans based upon these and other important factors such as the health and safety of our people, the services they provide and the client industries they serve.”

Omnicom has contingency plans for the second half of the year, depending on how the situation evolves in local markets across the world.

“We expect our performance to vary by geography depending on how effective local governments have responded to COVID and in turn in reopening their economies,” Wren says.

“Additionally, we expect some industries that have been hit the hardest such as travel and entertainment, as well as our event businesses will likely continue to be challenged.

“While other industries such as retail, food, beverage orders as well as our media buying business will likely see improvements.

Omnicom, after stripping out costs from the business, including cutting 6,100 jobs, expects margins to December to be in line with those in the prior year.

“We remain confident that we will weather this period and emerge a stronger organization,” Wren says. 

Here's where Omnicom's revenue came from during the June quarter:

Omnicom Q2 2020

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