Advertisers’ concerns around viewability and fraud are slowing down spend on digital advertising, said Daryl Simm, chairman and CEO of Omnicom Media Group during the holding company’s Q2 2016 earnings call on Thursday morning.
“While [advertisers] are continuing to grow their digital budgets, there is a tap at the brakes in that space as some react to concerns about the viewability or fraud matters,” he said.
Overall advertising grew organically 7.7% since Q2 2015, though Omnicom didn’t say where that growth came from.
While advertisers spent more on the TV upfronts this year – to avoid the high premiums in last year’s scatter market and to compensate for dwindling supply as audiences shift to OTT and other sources – that money isn’t necessarily coming from digital budgets, Simm said. Digital might not be growing as readily as in quarters past, but it’s not decreasing either.
“Digital budgets are not going down,” Simm said. “We’re still growing in the digital space.”
ANA Aftermath
Simm said while it’s “too soon to tell” how clients will react to the ANA report released in June, they “express a high level of comfort.”
But that might change.
“If this continues to evolve, we’ll see a reduction of the share of programmatic that’s on performance- and principal-based models,” he said.
Omnicom’s principal-based buying units include Omnicom’s trading desk Accuen, corporate barter agency Icon International, traditional media trader OmNet and parts of the company’s CRM business, according to a report from Pivotal Research Senior Analyst Brian Wieser.
Accuen brought in $18 million in incremental revenue gains for the quarter. That represents a deceleration from Q2 2015, when incremental revenue gains were 40% compared with the previous year. That might be due to the ANA report’s release, which condemned agency trading desk practices.
In response to the report, Omnicom acknowledged that nontransparent buying does occur within its US agencies but that clients are fully aware of the situation and must opt in to participate.
“In the case of one global digital media provider…we assure them of the practices we follow and address any questions they have,” said Omnicom CEO John Wren. “We maintain strong compliance controls in both meeting the spirit of our client relationships and the terms of our client contracts.”
When investors asked whether or not clients will become more cautious of opaque buying methods, Simms said, “It’s still soon after the ANA study has been released.”
“There’s a difficult balance that if you talk too much about it, you scare the client who doesn’t do their homework,” Wieser said.
Wren also said Omnicom is looking at CRM as an area of larger focus this year.
“Looking at it longer term, as you get into addressable TV and you get into measure things more closely we believe CRM is going to become more and more important as you look forward,” he said. “So, we are making investments, we are making changes and going through quite a bit of effort in the whole area.”
Overall, Omnicom saw revenue increase by 2.1% to $3,884.9 million from $3,805.3 million. The impact of foreign exchange rates reduced revenue by 1.6%, or $63 million, but it’s still too soon to gauge Brexit’s overall impact on Europe’s advertising economy.
Updated quote attributions.
