In the midst of a looming recession many large advertising companies have resisted spending declines, but their luck could be over.
Ad spending has dropped for many companies as they have been faced with rising inflation prices and a threatening recession, but some of the top ad agencies have remained unscathed thus far.
Top leaders WPP PLC, Publicis Groupe SA, Omnicom Group Inc, Interpublic Group of Cos. and Dentsu Group Inc. have all exceeded their prepandemic growth rates in recent months, according to The Wall Street Journal.
Why it’s news
Before the pandemic some of the companies had been facing declines in revenue as digital ads have been rising in popularity. In recent years, many advertisers started investing more of their money into digital spaces like Facebook and Google, which sometimes do not use agencies and sell directly to marketers.
This year, however, all five of the companies raised their guidance for revenue growth to somewhere between 6% and 7%, an increase of as much as two percentage points over estimates made earlier in 2022, says The Wall Street Journal.
Many analysts are questioning why the revenue is accelerating again after remaining the same throughout the pandemic. One reason is that the demand for digital ads is not slowing down.
Despite many areas of spending dropping off during the pandemic, digital advertising spending grew 12.2% year over year in 2020, according to a report by the Interactive Advertising Bureau.
With the large shift moving to digital ads it is cutting out ad agencies. Although the ad agencies have been doing well recently, investors are remaining cautious. The major ad companies have been doing well, but investors are not optimistic that it will continue long term.