NEW YORK: As clients pulled back on spending, organic revenues at the Interpublic Group's (IPG) PR agencies declined about 7% during the second quarter, which ended June 30, and dropped about 5% for the first six months of the year, said Harris Diamond, CEO of the holding company's Constituency Management Group (CMG) division and Weber Shandwick.
Diamond, who did not reveal results at specific agencies, said that clients are cutting back on existing work, rather than scuttling agency work completely.
“We're not really seeing client losses, per se, which is what we saw in 2002 or 2003 where they just cut spending,” he said. “What we are seeing is client cutback – they're spending 95% of what they were spending six months or more ago – but we are not seeing what we saw last time, which is complete sectors disappearing.”
He noted that "last year was probably our best year,” but today's “reality is that it's a tough business environment.”
Earlier this week, CMG, the IPG division that contains its PR agencies, reported declining year-over-year revenue for the third straight quarter on July 28. For the second straight period, total revenue also declined by a greater percentage than the quarter before.
CMG year-over-year revenues declined nearly 24% in total for the three months ending June 30, and declined nearly 18% organically. For Q2, the division earned $226.2 million, compared to $297 million the year prior. Diamond said the decrease was exacerbated by currency changes.
On an earnings call, Michael Roth, CEO and chairman of Interpublic, said that despite the revenue decreases, the company's PR agencies performed well in comparison to CMG's events businesses.
“At our CMG units, we've already discussed the difficulties faced by the events businesses. Conversely, our two global PR firms, Weber Shandwick and GolinHarris, continue to show resilience,” he said, citing recent wins of State Farm, Playtex, and Johnson & Johnson.
IPG's PR firms, housed in CMG, include WS, Golin, MWW Group, Carmichael Lynch Spong, and DeVries, among others. The division also includes branding and other non-advertising agencies like Jack Morton, FutureBrand, and KRC Research.
Diamond declined to make a forecast for the PR agencies for the remainder of the year, but said that the “business environment continues to be, at best, murky.” He added that PR agency business is “reasonably stable.”
Roth said he expected the company's second-half performance to be in line with 2009 to this point.