When the results for the Q1/FY 2021 were released a few months ago, tales of recovery and hope started spreading across the industry, as optimistic figures of growth and recouped losses started popping up from the industry giants and beyond. Following what has been a rather grim year for the creative industry, Adland found its way back to the top, and according to some, it may even be on the right path to one of the greatest recoveries in our history.
A word of caution is needed: these results should not fool us into believing that the industry has healed completely. The aftermath of Covid-19 is likely to be heard, seen and felt until at least next year – but that is when the economy is most expected to boom. And we, as the main players of creativity, will have a big part to play in this.
Image credit: Imagination
NABS warns about financial and emotional strain
Following a disastrous 2020 after a rather challenging 2019, Japanese giant Dentsu laid off 10% of its ~60,000 employees last year, in an effort to recoup losses in profit and organic growth. That story made all the main headlines in the industry and beyond, but it was just the tip of a much larger iceberg breaking up all over the industry.
According to a survey carried out by the Chartered Institute of Marketing between July and August 2020, nearly 40,000 marketers lost their job last year. “One in ten (9%) of the respondents said that they had been made redundant, one in five (20%) reported that they had taken a pay cut and a similar proportion (17.5%) said that they had taken enforced holiday.”
A recent warning by NABS, the support organisation for the advertising and media industry, corroborated that fact. NABS operates to offer financial and career advice to professionals in need, and in 2021, NABS request for grants surged, making up 39% of calls to the advice line – up 6% year-on-year. Employees are currently under financial and emotional pressure, but somewhat fortunately in this rather dim scenario, calls related to redundancies have diminished.
On the topic, Diana Tickell, one of Creativepool’s 2020 Top 100 Creative Leader of the Year, said: “The reduction in calls regarding redundancy is really encouraging for our industry, but we are seeing the longer-term challenges of the significant impact on individuals. It's critical that we remember to support the wellbeing of all our talent who are still coping with the many challenges of living and working through the pandemic.”
Image credit: Birger Linke
But the industry is… recovering?
Almost exactly one year ago, the industry was in a rather bad state. According to the Advertising Association/WARC Expenditure Report in July 2020, UK adspend last year had dropped to £21.4bn, a quite hefty 15.6% drop year-on-year. However, even back then, that loss was expected to rebound to £25bn in 2021.
Due to rising levels of unemployment and the possibility of a second Covid wave in winter (which we had), year-on-year growth was not expected until Q2 2021, but it was forecasted that it would be there forth substantial. According to the report, adspend would rise to levels 16.6% higher than 2020 this year, but a full recoup to pre-Covid levels was not expected until 2022.
The financial results to close FY 2020 revealed themselves somewhat surprising, however. There was indeed a 7.2% decline in adspend due to the crisis, and yet this was softer than the Great Recession and was levelled out by a 2.6% rise in the last three months of 2020, leading to the highest quarterly total on record (£7.0bn).
Fast forward to 2021, and things are looking quite positive for the industry. According to the April 2021 expenditure report by the AA/WARC, adspend is forecasted to grow 15.2% this year, recovering the entirety of 2020's £1.8bn decline. Next year will most likely see a record £29.0bn in total adspend, leading to a 7.2% rise and possibly the strongest ad trade recovery in the UK.
It must be noted however that recovery is not uniform, with some media bouncing back strongly, and others still lagging behind. The latter is especially true of the cinema industry, expected to experience a 226.8% growth, digital out of home forecasted at 52.3%, and traditional out of home at 14.5%. TV, Direct Mail and publishing disciplines, instead, are expected not to recoup their losses before 2022.
The strong shift into online video, social media and search markets is what will make the biggest difference. According to the report, these three all together are expected to account for two-thirds (66.4%) of all UK advertising spend this year.
All of this paints a rather optimistic picture and makes us positive for the entire industry: the ad market will most certainly recoup its losses in 2021, defying all expectations.
Image credit: AKQA
What about the industry giants?
If we look at the question from the perspective of clients, the Advertising Association/WARC report is excellent to understand the current state of the industry. What about the industry giants? How are WPP, Publicis Groupe and others, as we are stepping into Q3 2021?
The results vary somewhat greatly across the board, but there is much to be happy about. Let’s talk about them one by one.
Amongst the industry giants, WPP is undoubtedly one of the big winners. Following a £2.8bn loss in 2020 and an 8.2% loss in revenue (£12.0bn), WPP saw significant declines across its global markets, with US and UK sitting at -5.7% and -7.4% respectively at the end of 2020.
Enter 2021, and the first quarter is already looking much brighter for the holding giant. WPP recorded a 3.1% growth in Q1, with outstanding performance in China (18%) and UK (6.5%). On the other hand, the US are still quite weak, but growing nonetheless (0.7%). Overall, WPP experienced a £2.9bn growth in quarter revenue, up 1.8% YoY.
These figures indicate that WPP may be able to recoup its losses in 2021 after all. Others, however, may not be as lucky.
Like many others last year, Publicis Groupe did not fare very well during the Covid crisis. The French giant closed 2020 with a decline in organic growth of 6.3%, and it will be a while before it can recoup those losses.
Still, Publicis’s results are showing a return to growth in a challenging environment. The group was able to deliver a 2.8% organic growth which was mainly drive by the US and Asia, somewhat opposite to WPP – with Asia growing by 5.7% in total (3% just in China).
Europe is showing a sequential improvement over last year, with a performance slightly down in Q1 at -1.8%, compared to the -9.1% of the previous quarter.
Overall, Publicis is opening the year with some well-placed optimism and it may well get back to pre-Covid levels even earlier than anticipated.
Following an organic decline at -9.6% at the end of 2020, Omnicom found itself with -11.9% in net revenue, bringing it down to $13.1bn. The aftermath of this has been carried over into Q1 2021.
In the first three months of the year, Omnicom has recorded a -1.8% in organic growth and has proven to be struggling in the UK and US, with -6.4% and -1% in growth respectively.
However, these figures are somewhat of a false flag. In truth, Omnicom has experienced some of the biggest win last year, securing big accounts such as Home Depot and a multi-year deal with Allianz. Additionally, and especially in the UK, Omnicom was one of the biggest players in the Covid-19 awareness campaigns, with millions poured by the government into advertising to make sure the public was aware of the current crisis.
While not going as strong as the others, Omnicom has the potential to recoup its losses with its big account wins and ambitions. I guess we’ll just have to wait and see.
The Interpublic Group experienced an organic decline of -4.8% at the end of 2020, with like-for-like sales down 6.5% to $8bn.
In 2021, things seem to be going a bit more smoothly. Interpublic has recorded an organic revenue of 1.9%, though it has struggled in the US with a mere -0.2% decline. Europe was its strongest market with a 12.4% growth overall.
Philippe Krakowski, CEO of IPG, said himself confident that even more growth can be delivered throughout 2021. “Building on a strong start to the year, and predicated on the assumption that there will continue to be a reasonably steady course of global economic recovery, we believe that we can deliver organic growth for the full year in the range of 5% to 6%.”
With a like-for-like net revenue decline of 9.2%, the Havas Group had quite some loss to recoup, and a rather challenging beginning of 2021 to enter with renewed confidence. And though it experienced a 7.5% drop in organic growth last year, Havas was able to make a substantial improvement by reaching a mere -0.8% decline for Q1 2021.
According to parent company Vivendi, these results were “better than expected” and account for the big wins of Havas throughout the past 12 months, such as Volkswagen in the UK and Keurig Dr Pepper in the US.
One may be easily mistaken into believing that there was no growth for Havas entering 2021 – and you would be right to an extent. However, the group was able to gain some significant ground, leading to, indeed, some renewed confidence and hope for the near future of the company. Commenting on 2020, Yannick Bolloré, Global CEO of Havas, said that Havas is now even “stronger than before the crisis.” Time, as I’m sure, will tell.
Amongst all the industry giants, Dentsu was undoubtedly the one that was hit the hardest by Covid. As mentioned in the opening of this piece, Dentsu was forced to lay off around 6,000 employees in 2020 following a $1.5bn in net losses.
You can’t recover from such a crippling blow too easily, but Dentsu is showing signs of a positive momentum.
Q1 2021 saw an organic revenue decline of -2.4% (222.4bn Yen against the 227.1bn year-on-year), which, according to the company, was expected due to Covid complications. However, Q1 2021 also saw a progressive improvement on growth at 2.5% as client confidence returned and adspend approached new levels of normality, spread across operating margin and net profit.
With an encouraging start to the year, the Group is confident that this positive momentum in revenue growth could lead to recoup the losses as early as next year.
Overall a positive picture
I am no economist, but you will have picked up by now that the trend is looking quite positive for the industryand all of Adland seems on the path to recovery. Smaller agencies cannot be fairly compared with industry giants, but as adspend increases, they too are certain to find new ways to recoup their losses, hopefully leading to one of the greatest economic and advertising booms of the past 30 years.
The Covid-19 crisis has inflicted some quite unfair and painful blows to the industry whole, but things are starting to look brighter. As the vaccines keep rolling out and restrictions are eased (hopefully in July now), we will see consumers going back to a new normal and brands investing more and more in the wonders of advertising.
And like with any social revolution, it will be incredibly thrilling to be part of the change that is to come.