Marketing Services Revs Omnicom Earnings Spike

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Omnicom Group Inc., New York, parent company of agency networks BBDO Worldwide, DDB Worldwide and TBWA Worldwide, surprised the industry this week when it announced a 24 percent increase in net income.

Such impressive news about the world's largest advertising and marketing services organization won resounding cheers from Madison Avenue pundits and Wall Street analysts alike. But perhaps more noteworthy was how much the giant conglomerate's success was buttressed by the acquisition of direct marketing services, Internet and digital media-oriented companies across the board: a fact that may finally end the perception of direct marketing as the bothersome stepchild to traditional advertising.

"Marketing services firms are definitely growing at a more rapid rate," said Randall Weisenburger, executive vice president/CFO at Omnicom. "And Omnicom's business is now split for the quarter with 52 percent of the revenue coming from below-the-line marketing services organizations and 48 percent from traditional advertising." Weisenburger made clear, however, that much of the revenue did come from recent acquisitions. The very fact that the acquisitions played such a significant role is another sign of an industry in the throws of historical metamorphosis.

"The lines between advertising and marketing are definitely blurring," said Weisenburger, "and it's been the trend in the past four or five years for us to move more toward acquiring marketing services firms."

Weisenburger said such changes are driven in part by the evolving nature of technology, but also by more intense entrepreneurial activity on the marketing services side of the business rather than traditional advertising. He also notes, like many of his contemporaries, that clients today want programs that are integrated in a seamless fashion, and that the big agency networks and conglomerates have to be able to deliver the best possible range of services.

Omnicom reported that its net income for the six months ended June 30 increased 26 percent to $172.7 million from $137.6 million in 1998. Domestic revenues for the six months ended June 30 increased 20 percent to $1.226 billion compared with just over $1.025 billion in 1998. International revenues for the six months ended June 30 increased 22 percent to $1.191 billion compared with $974.6 million in 1998.

Weisenburger said Omnicom plans on making more acquisitions during 1999. He also predicts that the company will grow faster than the 6.5 percent figure predicted for 1999 overall by Morgan Stanley Dean Witter.
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