Major ad agency Interpublic reported steady first-quarter results, with adjusted earnings per share beating Wall Street expectations, but the company warned that COVID-19 will likely take a significant toll as the year continues.
First quarter revenue dipped nearly 2% from the year-earlier period to $1.97 billion, roughly in line with analysts’ consensus estimate, with earnings of 11 cents a share topping forecasts by two cents.
Along with Omnicom and WPP, IPG has begun to feel the force of the pandemic, which has already taken an estimated $12 billion out of the U.S. TV ad business and is prompting a marketing retreat across platforms and global regions. Agencies at least have some maneuverability in this climate and can adjust their business models and approach to continue operating. IPG estimates that it has about 95% of its employees working from home.
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A report this week by analyst Michael Nathanson predicted the ad slump would be worse than the 2008-09 recession, with “bumpy” conditions for agencies. Nevertheless, he predicted, clients are still likely to see the agency model as more viable than shouldering the cost of doing advertising and marketing in-house.
“It goes without saying that uncertainty and anxiety as a result of the devastating COVID-19 pandemic have generated significant challenges,” CEO Michael Roth said in the company’s earnings release. “Unfortunately our solid results in the first quarter cannot be indicative of the remainder of the year.”
Roth didn’t offer specifics, but the ad environment has entered an unsettling phase, especially for television and digital. Both areas are seeing record usage as many parts of the world have endured lockdowns due to the coronavirus. But the economic toll has been severe, with businesses laying off or furloughing millions of workers and consumer spending declining sharply.
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