Ad agency shares fall after Omnicom results indicate changing digital landscape
Shares of traditional advertising companies are under pressure on Tuesday after peer Omnicom OMC) reported quarterly earnings on Tuesday morning that reflected slower revenue growth. Omnicom, as well as rivals Publicis (PUBG), IPG (IPG), and London-based WPP (WPP), have been under pressure from the start of trading. Omnicom's worldwide revenue in the second quarter of 2018 increased 1.8% to $3,859.6M from $3,790.1M in the second quarter of 2017. "Across our regional markets, organic growth in the second quarter of 2018 as compared to the second quarter of 2017 was 11.2% in the Euro Markets and Other Europe, 8.5% in Asia Pacific and 2.5% in Latin America, while North America decreased 0.9%, the United Kingdom decreased by 2.2% and the Middle East and Africa decreased by 8.0%," said the company in a statement. COMPETITION FROM CONSULTING AND INTERNET AND TELECOM: Consulting firms like Accenture (ACN), Interactive, PwC Digital Services, IBM (IBM) iX, and Deloitte Digital are gaining traction in the ad business, according to an earlier report from AdAge. "These consultancies are rising fast by gaining a foothold in marketing departments and wooing chief marketing officers with their vast array of strategic and data analytics solutions to big business problems that traditional advertising can no longer solve alone. And in some cases, they are layering on creative services and content marketing, putting them solidly on the same turf as traditional shops," AdAge said. As consumers move from traditional media to digital there has been a shift in media consumption patterns, according to Reuters. As digital advertising surpasses TV advertising firms like Google (GOOG) and Facebook (FB) control more a large portion of the digital advertising market in the US, according to media reports. Telecoms are jumping into the ad game also, as witnessed by AT&T's (T) purchase recently of AppNexus, which operates a global digital-advertising marketplace and related software. PRICE ACTION: Shares of Omnicom Group are falling 8% this afternoon, dragging down peers Publicis, Interpublic Group, and WPP.