Dive Brief:
- Omnicom Group beat expectations on organic revenue in the fourth quarter, up 7.2% year-over-year, according to an earnings statement. The ad-holding group’s full-year organic growth was 9.4% over 2021.
- Executives called out major account wins, including Omnicom Media Group being named media agency of record for Burberry and L’Oreal in the U.S. The personal care marketer has an estimated $1 billion media business.
- Looking ahead, the agency firm is targeting organic growth between 3-5% in 2023, highlighting promise around areas like retail media, commerce and artificial intelligence (AI). However, leaders stated they are still cautious of macroeconomic and geopolitical factors and the potential impacts on performance.
Dive Insight:
Omnicom joined rival Publicis Groupe in closing out 2022 on a strong note, another sign that traditional agency networks have stayed resilient despite a trying macroeconomic environment. Ongoing volatility is still leading many in the industry to take a cautionary stance, with Omnicom forecasting 2023 growth that’s lower than what it notched last year. Executives pointed out that some categories, like tech, are suffering, though expected to reinvest in marketing following a challenging run.
Breaking the Q4 results out by category, Omnicom saw 6% YoY growth in advertising and media, its largest segment, with key account wins like L’Oreal. Precision marketing was up 11.6%, a jump that executives attributed to healthy client demand for digital transformation and data and analytics services. Commerce and brand consulting grew 7.2% organically, while experiential marketing recorded a 17% gain due to major cyclical events like the FIFA World Cup providing more benefits than expected.
As Omnicom aims to manage costs, it will continue to pursue outsourcing, offshoring and automation, executives said. Retail media and commerce-related capabilities remain a major focus for the ad-holding group, which pointed to deals like the proposed Kroger-Albertsons merger as a sign of continued expansion in the space.
During a Q&A portion of the call with analysts, John Wren, CEO of Omnicom Group was asked about the emergence of AI like ChatGPT, the large language model that recently secured a heavy investment from Microsoft. ChatGPT’s surge in popularity has led rivals like Google to ramp up similar bets. Wren said that he views automation as a means to “eliminate” more mundane projects and help support Omnicom’s most high-powered talent, while noting that “not everybody will love it.”
“We'll be embracing it as quickly as we possibly can because we think it's good for our smartest people, and therefore, it will be good for ... the work they do on behalf of our clients,” said Wren.
