Agency holding company Omnicom Group reported Q2 revenues above analysts’ estimates, due in part to growth in its programmatic buying unit, Accuen, as well as growth in the retail and telecom sectors. Its rival, Publicis Groupe, with whom it once planned to merge, had a weak quarter by contrast.
Omnicom’s global revenue increased 6.4% to $3.9 billion from $3.6 billion in 2013’s second quarter, with domestic revenues hitting $2.1 billion.
Paris-based Publicis reported decreasing revenues of $2.37 billion, compared to $2.41 billion in 2013’s second quarter. Analysts estimated that Publicis’ earnings would reach $2.53 billion, and the company said negative foreign-exchange movements had a large impact on its sales figures.
Omnicom’s Accuen unit is taking a portion of the media it buys and sells, which the company disclosed to investors for the first time. The company reported $40 million in growth due to its programmatic buying unit, but did not say what margins it takes.
“We’re taking a principle bet,” Omnicom CFO Randall Weisenburger said during the call. “We’re buying specific media and reselling that at hopefully an increased price in most circumstances, since our revenue is based upon the difference between the purchase price in media and the sales price. We then have to provide all of the services, all of the underlying technology, build the platform, do the insights and take all the risk.”
This seems similar to the controversial strategy behind WPP’s trading unit, Xaxis, though Omnicom CEO John Wren swiftly pointed out differences.
“In our case it’s opt-in,” he said. “Its not all of our clients, it’s only those clients who choose to participate. At this point it’s early days and this business isn’t fully developed. I don’t know that you can draw a straight line and compare all the groups at this moment.”
While Wren was happy with his company’s earnings, his counterpart at Publicis Groupe was not.
“These figures are not satisfactory by our standards,” Publicis CEO Maurice Lévy said during the company’s earnings call. “They are not consistent with what our operations can achieve.”
Analyst Brian Wieser of Pivotal Research Group said Publicis’ earnings were worse than expected, calling the results primarily company-specific. “While a soft top-line was not surprising,” he wrote in a research note, “weak margins were more so.”
Moving forward, Lévy said that the company’s digital growth (+8.8% for Q2 2014) proved that its strategy is “spot-on,” and said that the company would focus on controlling costs in an attempt to achieve improved margins for the full year.
Did Omnicom’s quarterly victory come at all at Publicis’ expense?
“While we’ve won a lot of business this quarter, I don’t believe Publicis is where we got it from,” Wren said. “Our wins really come from Interpublic and from WPP.”
Omnicom said the company was on track to meet its revenue goals and target margins by the end of the year, and Publicis also expects to rebound in the second half of 2014. But Wieser was skeptical: “Commentary around (Publicis’) 4.0% full-year organic growth goal offered what we would characterize as tepid support for the company’s goal.”