Omnicom organic revenues rise 11.5% in Q3
The holding company projects 9% growth for 2021 and is preparing its return to the office
Oct 19, 2021 10:53:00 PM | Article | Alison Weissbrot
Omnicom’s business is returning to pre-pandemic levels.
The holding company’s organic revenues grew 11.5% in the quarter to $3.4 billion, a rebound from the 11.7% decline it experienced in Q3 2020, but roughly flat over the Q3 2019’s $3.2 billion in revenues.
Organic growth clocked in at 7.7% year over year in the U.S. and 20.2% year over year for North America. The U.K grew 11.4% year over year and Europe increased 14.9% in the same period. Asia Pacific, meanwhile, increased 19.6% year over year.
By discipline, CRM and precision marketing, which offers performance marketing and business transformation consulting, was “especially strong,” said CEO John Wren on the earnings call, growing 24.3% in the quarter. The area is a growing focus for Omnicom, which is looking to make acquisitions in the space.
Advertising, which makes up more than half (53%) of Omnicom’s revenues, grew 8.6% organically. CRM commerce and brand consulting grew 18% year over year, while CRM execution and support, which includes research and field marketing, grew 8.3%. PR and healthcare were also strong, up 10.5% and 6.6% year over year respectively.
Experiential marketing grew 50% year over year, not quite back to pre-pandemic levels but making a comeback in markets such as China. “Where it’s possible, you can see it’s coming back,” Wren said.
Omnicom’s operating profit for the quarter was 15.8%, which exceeded 2020 and 2019 levels thanks to continued cost savings related to travel and office expenses. Salary and service costs, however, increased 10.6% in the quarter as offices reopen and travel ramps back up.
“We are beginning to see the return of travel and other addressable spend costs as pandemic restrictions ease,” said chief financial officer Phil Angelastro. “However...we will continue to receive benefits from an agile workforce.”
For 2021, Omnicom is protecting 9% year over year growth.
Omnicom, which has spent the past few years trimning its portfolio, is largely finished with dispositions and is ready to add new capabilities.
The holding company acquired e-commerce performance agency Jump 450 this month, and is also looking to deepen its expertise in performance marketing, mar tech consulting, digital and data-driven insights. The company currently has people in the market seeking targets in each of these areas, Wren said.
“The portfolio we are left with matches where clients need and are going to spend money now and for the foreseeable future,” he added.
Global account wins are also a focus as marketers consolidate their business across one provider. Omnicom pointed to wins this year including Philips, Chanel and Mercedes Benz. For the automaker, Omnicom will pull together best-in-class talent and capabilities across its network under a group called “Team X.”
Back to work
Omnicom is preparing to return to an in-office culture.
The company didn’t mention a specific return date, but Wren said that “without any disease setbacks, we’ll increasingly see people back in offices because they are already going to sporting events and dinner and enjoying themselves.”
Angelastro noted that “there’s a lot we can do remotely, but over time, we are a culture that works best when we are together.”
As for the ongoing global talent crunch, Omnicom is relying on its strong culture, its training and development programs and the opportunity for people to work across a diverse set of clients and industries as a draw. Wren also noted that clients are facing the same talent crunch and calling on agencies for their assistance in areas they hadn't in the past.
As agencies face inflation on employee salaries in a competitive market, Omnicom expects addressable costs to rise, but is “optimistic” it can maintain its current profit margins, Angelastro said.
“We have benefitted from a reduction in travel and other expenses, and we expect to maintain some of that permanently,” he said. “But as we grow costs, the challenge for us will be to maintain them.”
(This article first appeared on CampaignLive.com)