Interpublic Group of Companies Inc., the second-largest U.S. advertising company, forecast the London Olympics this summer won’t be enough to offset a tough ad market in Europe because of the sovereign-debt crisis.
Interpublic is targeting a 3 percent revenue increase this year, excluding acquisitions, as the crisis in Europe plays down significant growth in emerging markets, Chief Executive Officer Michael Roth said in an interview.
“Europe is still our clients’ biggest concern as it’s an important market for us, and we are not counting on a recovery,” Roth said yesterday at the Mobile World Congress in Barcelona. “The Olympics will certainly help, but taking some of the uncertainty in Europe away will be more helpful.”
Advertising executives have said companies in Europe are scaling back plans for ad spending, even as events such as the Olympics, the European soccer championships and the U.S. presidential elections this year promise to give the industry a boost. Publicis Groupe SA (PUB) CEO Maurice Levy said last month its clients on the continent had curtailed their initial marketing plans for the year.
Interpublic dropped as much as 1.5 percent to $11.63 in New York trading today, the biggest intraday decline in more than two weeks. Publicis rose 0.9 percent in Paris. WPP, the world’s biggest advertising company, gained 2.5 percent on the London exchange.
The findings fit with what U.K. marketing executives said in the latest Bellwether report from the London-based Institute of Practitioners in Advertising. Companies are the most pessimistic they’ve been since the last recession and plan slower growth in ad spending, according to the survey.
The worst case scenario for New York-based Interpublic will be the crisis spreading to more non-European markets, Roth said. “I don’t think that will happen so it’s only if there’s a real economic disaster that I’d be concerned about,” he said, adding a gradual economic recovery should start soon, helping the company recover a 5 percent average sales growth in order to boost profit margins.
British companies ranked their business prospects for the first quarter of this year as the worst in 11 quarters and said their planned increases for ad spending in 2012 are weaker than in any recorded year before 2009, according to a survey of 300 organizations. Digital marketing has become the fastest-growing part of the U.K. ad industry as companies look for ways to save money, according to the institute’s report.
Latin America, Asia
Faster-growing markets in Latin America and Asia may help Interpublic achieve that revenue growth as those markets are already compensating the loss of clients in Europe, Roth said.
“So far we are seeing our clients spend money clearly in emerging markets such as China, India or Brazil, where there’s great growth, with also good performance in the United States (X), and I expect that to continue,” Roth said.
“Digital, social media and integrated offerings are the areas where we see major growth,” the CEO said.
Brazil represents one of the most promising markets for Interpublic, Roth said, adding the company is targeting “high double digit” growth in the country. Turkey, Russia and the Middle East are other markets growing fast, he said.
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