Dive Brief:
- Havas Group announced it missed growth expectations for Q2, with organic revenue down 1% for the quarter, according to MediaPost Communications. Organic revenue was also down 0.4% for the year's first half — negative results that contrast with earlier forecasts for growth around 2% to 3%.
- The poor showing was blamed in part on lowered spending from clients, fitting into a broader industry trend. The ad holding group also cited pressure on fees from clients and economic issues in certain markets like Brazil, Mexica, India and China. Like other holding companies, Havas pointed to spending reductions from CPG clients, in particular, in the first half of the year, coinciding with those companies facing organic declines as well.
- Havas is hoping for an improvement in the second half of 2017, according to CEO Yannick Bollore, but the firm hasn't issued a revised guidance over its earlier forecast of organic growth of up to 3% for the full year.
Dive Insight:
Havas' weak first half showing comes right on the heels of WPP cutting its own growth forecasts for the year from 2% growth to 1% growth or less during its Q2 earnings report. WPP's dimmer outlook sent its shares tumbling late last week and caused a ripple effect throughout the ad industry. The common theme emerging, with Havas, WPP and also competitors like Interpublic Group, is that penny-pinching from consumer goods clients when it comes to marketing and advertising spend is having a pointedly deleterious effect on agencies' bottom lines.
While some of this is spurred by market instability and the growing dominance of companies like Amazon, which are hurting the business of traditional CPG and retail companies, a harsher reality is that traditional agency players have also been losing the trust of their brand clients and become less appealing as marketing services providers.
A report published by the Association of National Advertisers (ANA) and the investigative consultancy K2 Intelligence last summer found non-transparency practices were running rampant in ad agencies, including the exchange of cash rebates brand clients weren't subject to. Stemming from those findings, agency contracts are under closer scrutiny for media transparency this year, though many are still struggling to address the issue. Earlier this month, the ANA released another report that found non-transparent production practices at multiple ad agencies and agency holding companies — a widespread and costly problem for advertisers.
Ongoing market instabilities, combined with these controversies, mean that agencies' stake in the marketing landscape will likely continue to dimish as brands eye newer players like consultancies and also move more work in-house.