Publicis is the latest global advertising giant to announce cost saving measures, indicating that the industry is not immune to the impact of Covid-19.
On Monday, global ad-giant Publicis announced its plans to slash costs by $545 million by cutting management pay and halving its dividend, in a bid to combat the financial hit of the coronavirus outbreak.
Publicis has proposed a reduction to shareholder dividend by 50% to €1.15, which will be paid in September. The company hopes this will encourage shareholders to reinvest the dividend in the company by choosing the option of payment in shares
The company also announced a 17.1% increase in net revenue to €2.5 billion but a 2.9% fall in organic growth for the first quarter of 2020, which it believes is a result of Covid-19.
Other advertising giants are undertaking similar measures
Publicis isn’t the only ad-giant to suffer at the hands of the outbreak, with other players also taking a hit financially.
On 27 February, WPP was revealed as the biggest faller on the FTSE 100 as shares in the company fell by 15% after it reported a slowdown in business activity.
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More recently, on 25 March, Interpublic Group (IPG) announced its decision to withdraw its financial performance targets for full-year 2020 because of the impact of the Covid-19 outbreak.
The uncertainty surrounding the duration of the outbreak, combined with weak economic and financial conditions has made it difficult for company’s such as IPG to assess the impact on major clients, and to what extent they will reduce advertising budgets.
The advertising industry will face ongoing challenges amid the outbreak
As players in the industry continue to grapple with the immediate impact of the Covid-19 pandemic, the long term effect on buyers will present a difficult challenge to overcome for advertising company’s.
The outbreak is already forcing companies to reevaluate their spending, as in periods of financial strain, marketing and ad budgets are often the first to be cut back.
FMCG companies, which account for a significant proportion of revenue for a number of companies, are currently slashing advertising budgets and campaigns are now being reviewed and scaled back.
The automotive market, another lucrative revenue stream for advertisers, is also struggling amid the crisis. As of March 2020, five automakers have already turned to the capital markets to secure credit lines worth some $55 billion to see them through the crisis, indicating that expensive advertising campaigns will be the least of their worries.
The cancellation and postponement of major sporting events globally will also have financial repercussions for global advertising companies.
The postponement of the NBA and NHL came just as they were approaching the high-stakes playoff games which are the most financially lucrative. The possibility of losing playoff games could lead to hundreds of millions of dollars lost in advertising revenues for media companies.