The first set of holding company financials since the coronavirus pandemic took hold have been released and are worthy of close scrutiny for clues about the future of communications and marketing.
The period under review covers performance from January through March 2020, so the main impact of COVID-19 won’t truly show its colors until Q2 numbers are unveiled in July.
PRWeek’s Agency Business Report showed that many firms, especially in the PR sector, had a bright start to the new decade before these unprecedented circumstances really kicked in throughout March.
And there were encouraging signals for PR among the cautionary overall tone of the Q1 analyst calls, particularly in specialist crisis, reputation and healthcare areas that have been called upon by clients needing help navigating COVID-19.
While WPP’s PR segment declined 1.4% in Q1 on a like-for-like less pass-through cost basis, this was less than the global integrated agency (down 2.6%) and specialist agency (down 7.4%) buckets.
The company said declines were “mitigated by strong demand for some of our specialist PR services in the current environment” and “we are seeing continued and, in some cases, greater demand for our public relations, ecommerce, marketing technology and production capabilities.”
Year over year, Omnicom’s PR revenue actually rose 0.2% organically in Q1, compared to the same quarter 12 months prior when revenue dropped 0.5%.
Fleishman president and CEO John Saunders said he is “very happy” with his agency’s performance in Q1. “January and February were both excellent, and then everyone at Fleishman showed remarkable resilience in March working from home,” he explained.
Overall revenue at the holding company was up 0.3% organically. Healthcare grew most, up 9.6%, while advertising decreased 0.1%, CRM execution and support was down 0.9% and CRM consumer experience fell 1.3%.
On his Q1 earnings call, Omnicom chairman and CEO John Wren reflected on these numbers and noted it isn’t all “doom and gloom.”
“If you look at our healthcare sector, it’s probably up,” he adding, particularly noting the performance of the company’s public relations business in the healthcare space. “There are areas of our business, despite all the difficulty that’s out there, that are in fact growing.”
Omnicom PR Group is still lacking a permanent CEO since Karen van Bergen transferred to a new group role in January overseeing Omnicom University.
A spokesperson told me via email: “It is unlikely we will have someone until at least Q3. It is one of the biggest jobs in the industry so you can imagine this is a position Omnicom is taking its time filling. The search is still on amidst COVID-19, but for the moment we are celebrating the positive growth in Q1 under John Doolittle’s leadership as acting CEO.”
WPP CEO Mark Read also reflected on the coronavirus hiatus in remarks accompanying the Q1 results. "After a good start to the year, with growth outside of China in January and February, our business started to be materially impacted by COVID-19 in March,” he said.
Given that most of the big agencies are global in nature, they received early warnings from their China operations about what was likely to follow in other parts of the world.
Weber Shandwick CEO Gail Heimann noted in the Agency Business Report that the Interpublic firm set up a COVID-19 taskforce at the start of February to assess the virus’ likely impact on the company and its clients.
Having already pulled 2020 financial projections, Interpublic Group CEO Michael Roth conceded that staff reductions across the holding company are “unavoidable.” But he also highlighted bright spots for PR.
"There continues to be demand for the advisory side of the business especially in the PR space," he said. “This means we're seeing opportunities for crisis communications and strategic services from the group. However, as you would expect, other parts of the business such as experiential and sports marketing are being hit.”
The PR firms within IPG’s Constituency Management Group registered low-single-digit organic growth in Q1, according to Andy Polansky, the division’s chairman and CEO. That increase was in comparison to mid-single-digit organic and low-single-digit growth 12 months prior.
Polansky has set up a small centralized team at CMG to offer cross-discipline support to clients. He also noted in the Agency Business Report that a public health lens is going to be essential to all types of communnications scenario planning moving forward, underlining the positive health contributions to holding company Q1 numbers.
Job cuts, furloughs, salary reductions, hiring freezes and cost-cutting have already been implemented at the holding companies and, while not necessarily the hardest hit in terms of disciplines compared to advertising, media and experiential, PR is not immune to these developments.
Prior to its Q1 financials coming out, Omnicom CEO John Wren sent an internal memo to the group’s 70,000 employees about cost cutting. Sure enough, and despite the - relatively - positive PR numbers, last week Omnicom’s two largest PR firms, Ketchum and FleishmanHillard, instigated staff reductions and pay cuts in response to the pandemic.
Those parts of PR and marketing that still rely on events have been hit particularly hard, with Omnicom’s Wren commenting: “Even though some of our events businesses have done an excellent job of executing virtual events, overall, it has not been enough to make up for the lost revenue.”
PR firms are also doing their bit to help out the wider world during unprecedented times. For example, Hill+Knowlton Strategies is part of a team of WPP agencies supporting the World Health Organization on a pro bono basis in delivering global and regional public awareness campaigns to encourage people to stay at home and adopt safe behaviors.
Ogilvy, however you describe it these days, also contributed to the WHO initiative. A day before WPP's Q1 results were released, Ogilvy CEO John Seifert announced he was stepping down after a 41-year run at the iconic firm, so the leadership merry-go-round continues to turn in that parish.
Other tidbits from Q1 earnings included the public unveiling of WPP’s 19-strong executive committee, which Mark Read set up to improve the management of a group that was more of a fiefdom under his predecessor Martin Sorrell.
The unveiling showed that gender balance of senior oversight at WPP hasn’t improved much in the two years since I last wrote about it. There are only five women among the 19, although from PR’s point of view it’s good to see BCW CEO Donna Imperato among them.
WPP estimated that one in five pitches have been put on hold, but those that had already started prior to the lockdown are continuing.
And clients are starting to look ahead, despite there still being no consensus about “a return to normal.” While WPP also suspended guidance for the rest of the year due to market uncertainty, it noted: “A number of clients are seeking our advice and support on how they should market their brands in the recovery phase.”
There are undoubtedly challenging and tough times ahead, but within this there are pockets of optimism for the PR sector, especially in crisis, strategic advice and healthcare counsel – and these bright spots are being acknowledged by holding company CEOs.
PR firms are stepping up to do the right thing in contributing to social and community issues and the wider implications of coronavirus. They are also helping clients plan for an emergence from pandemic lockdown and the navigation of whatever becomes the new normal.
Let’s stay strong and we can get through this. Battered and bruised maybe - but we can come through the other side.