GroupM CEO Change, Agency Organic Growth/Billings Trends, Netflix Ad Inventory Share, Marketer Commentary And More
Madison and Wall: Saturday Summary for July 20, 2024
This past week was a very busy one with some of the first firm signs of 2Q24 trends for agencies, streaming services and marketer spending (at least in financial services).
Publicis and Omnicom posted their most recent results and showed accelerated growth for both of those holding companies, consistent with prior expectations and our analysis of independent agency growth trends. For both companies, we saw a continuation of strong media agency growth as well as growth in creative agency activity, too. What was not more of the same was our realization (not conveyed on the earnings call) that Omnicom, which historically allowed a greater degree of independences for its creative networks TBWA, DDB and BBDO in allowing them to run their own global operations independently, has begun a process of internal consolidation in certain countries, as we explored in our note. We think consolidation of this nature is inevitable for most of the world’s largest agency businesses.
In part because of their internal consolidation, media agencies at Publicis (in particular) and Omnicom are leading the way for both companies with approximately double digit organic revenue growth because they have been more aggressive in pursuing principal-based trading and other commercial models vs. competitors, including WPP’s GroupM, whose organic revenue growth has been lagging vs. their smaller peers according to our analysis of data for each business. As a result, Publicis is quickly catching up in size as we explored further in an analysis of new billings data from COMvergence.
It was therefore unsurprising that managerial change played out at GroupM this past week. Although many big challenges remain in effect for WPP, the new appointment will most likely be very favorable for its media business at minimum.
Meanwhile, in the streaming world Netflix posted its 2Q24 results. Growth in revenue and subscribers continued, but on our estimates ad inventory remains relatively modest because even with 34% sequential growth in the number of members subscribing to their ad tier, we estimate that the company has only 0.6% of total TV ad inventory because the number of ad-supported subscribers remains small and ad loads are necessarily light. This figure will undoubtedly grow significantly from current levels, especially as the service offers more programming which exposes advertising to broader audiences, as with upcoming NFL games at the end of the year.
Finally, we aggregated commentary on marketing and related data provided by several CEOs, CFOs and their companies so far this earnings season. Financial services companies including JP Morgan Chase, American Express, Wells Fargo, Bank of America and Citibank have dominated so far and provided decidedly mixed trends. We expect that a broader set of marketers are likely to convey a greater sense of growth as more results are released.