The award-winning cable drama "Mad Men" portrays advertising men of the early 1960s as working hard and playing even harder. These days, however, few people in the advertising agency are having much fun.
WPP Group Plc. (WPPGY), the world's largest advertising agency, today announced plans to slash 7,200 jobs. The London-based company, which owns the PR firm Hill & Knowlton and Ogilvy and Mather Worldwide, said April 28 that it will be "difficult to maintain" operating margins at 2008 levels. The job cuts will be in the U.S. and Europe. A company spokesman could not be reached for comment.
Advertising is one of the first things that gets cut when the economy sours, becoming a type of canary in a coal mine. As the Financial Times notes, WPP has been hurt by declines in spending in clients such as Kellogg (K), International Business Machines (IBM) and Ford Motor (F). Moreover, advertising spending continues to shift from newspapers and more traditional media to online media, which also is declining.
Worldwide spending on advertising is expected to rise 4.9 percent this year, down from 6.9 last year when there was a presidential election and the Olympics, according to Carat. Advertising agencies are being forced to respond to these circumstances.
Omnicom Corp. (OMC) trimmed its staff late last year. Interpublic Group of Cos. (IPG), another advertising agency holding company, has slashed 2,800 from its payroll. IPG also reported a loss of $73.9 million, or 16 cents a share, and that revenue plunged 11percent to $1.33 billion.
Last week, Publicis Group SA (PUBGY), owner of the Saatchi & Saatchi and Leo Burnett advertising agencies, said the advertising market deteriorated worse than expected. Chief Executive Maurice Levy told the press that he expects the economy to recovery in the second or third quarter of next year.
For advertisers, the good times are still a ways off.