Omnicom Q1 2017: Accuen Flat As Clients Move To Disclosed Programmatic Buys

Growth at Accuen was flat last quarter as more clients moved away from nondisclosed programmatic buying methods, where agencies procure inventory and resell it to clients with an unrevealed markup, said Omnicom CEO John Wren on the company’s first-quarter earnings call on Tuesday.

“A lot of clients have shifted to wanting these services on a fully disclosed basis, which puts us in the position of being their agent, rather than selling them a product,” he said.

This is the first time in two years that Omnicom reported flat revenues for Accuen, but growth had slowed to $10 million in Q3 2016. Before then, programmatic revenue had grown by between $18 million and $45 million each quarter since 2014.

Accuen’s flat performance, however, doesn’t suggest an unhealthy business, Wren told investors.

“The underlying business actually grew,” he said. “The method in which our service is purchased has changed, which is why you get the mathematics we saw.”

But Accuen’s stagnant quarter represents a larger shift in how clients are approaching programmatic after the Association of National Advertisers released a report in June exposing nontransparent practices at agency trading desks.

“To the extent that some clients would not have been fully aware of the principal model before but are now, it arguably doesn’t reflect a meaningful change in Accuen’s role for most clients,” said Pivotal analyst Brian Wieser. “It may suggest they are now getting what they thought they were getting before.”

More brand advertisers are influencing the shift toward disclosed buying by leveraging programmatic’s precise targeting abilities, said Omnicom Chief Financial Officer Phil Angelastro.

“The more brand advertisers look to effectively target the consumer they're trying to reach through programmatic, they're more likely to choose the more traditional approach, and we’re fine with that,” he said.

But he also added that Omnicom doesn’t expect Accuen to go back to its growth profile of former years, given the thick margins nondisclosed programmatic affords trading desks.

“We think this shift may continue, and as long as the underlying business continues to grow, that’s fine with us,” he said.

Overall, Omnicom saw global revenue grow 2.5% last quarter to $3.6 billion. The holding company disposed of several businesses in field marketing, events and legacy print that “did not fit our long-term goals,” Wren said.

In response to client Marc Pritchard’s call for simplification among agency partners, Wren alluded to a focus on streamlining Omnicom’s operations further this year by building up internal practice areas to deliver customized solutions. Omnicom demonstrated this strategy with the launch of a dedicated, full-service agency for McDonald’s last year called We Are Unlimited.

While consumer packaged goods and retail businesses’ cost-cutting efforts will not affect Omnicom as much as competitors given the portion of smaller amount of revenue that comes from these businesses, cost cutting will continue to be a trend as these companies move toward digital-first models, Wren said.

“We make the assumption that there’s going to be continued pressure, especially on big-box retailers,” he said. “Technology and the changing consumer have an impact on decisions.”

As for overall business health, Omnicom and clients are cautious given geopolitical conditions, such as the proposed budget and tax reforms in the US, the ongoing war in Syria and foreign relations under the Trump administration.


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