Worldwide Partners Advertising Confidence Index: Agency CEOs Confidence Levels Stable Now, Gloomy for the Rest of 2011
Tue, July 19, 2011

EMEA Agency Chiefs Least Optimistic Globally; For the First Time, Views on Government Policy  And How They Impact the Ad Business Turn Negative in North America and EMEA

DENVER—The confidence level of independent advertising agency CEOs regarding current economic conditions remained relatively unchanged in June when compared to the March Worldwide Partners Advertising Confidence Index, but they are far less positive when asked to forecast business conditions six months from now as not one participant, regardless of where they operate, said the global recession is over.

Other findings of the June WPI Index are that, with the exception of their counterparts in the Asia Pacific region, CEOs in other regions of the world have a dramatically increasing negative view about government policy and how it impacts the ad industry. Additionally, Europe/Middle East/Africa region executives say their confidence level about current business conditions plummeted 23 points to 73 in June from an already dour 96 in March.

The WPI Advertising Confidence Index across all measures of the survey for the second quarter of 2011 is 104, with 100 being the benchmark standard established in December 2010.  In March, the index across all measures was 107. The June index is down slightly, but not statistically significant.  However, the outlook grows more ominous when the CEO’s share their forecasts for their business six months from now,  as the June index drops to 96 compared to 108 just last March. Asia Pacific executive are far and away the most positive about overall at present (123) and in their views about business conditions for the remainder of 2011 (120). In North America, the confidence index across all measures in June was 107, down from 129 in March. Latin American agency managers come in at 84 when rating current conditions, compared to 94 in March. In the EMEA region, the confidence of agency CEOs is materially eroded, coming in at 73 when commenting on current conditions.
“The CEOs of our partner companies are telling us that for the first half of 2011, there has not been a material erosion of how they see business and economic conditions on the global level, though there is variance regionally, with Asia Pacific executives the most robust by far,” says Al Moffatt, WPI President and CEO. “What is worrisome is how they view the rest of the year. Just about every metric WPI tracks is trending downward, and the confidence index fell to 96 in June from 108 in March when the CEOs look out over the next six months globally.”

“This is the same group that back in early 2009 when the publicly traded advertising conglomerates predicted single-digit cuts in ad spending for that year, said it would be far worse. The Worldwide Partners agencies were right,” Moffatt adds.

Meanwhile, in the United States, the closely watched Conference Board Consumer Confidence Index declined 3.2 points in June, after posting a decline in May. “We’ve got consumer confidence waning, and we have our network of entrepreneurs not feeling better about economic conditions and unfortunately expecting them to get worse. Despite recent gains on Wall Street and in the share prices of ‘Madison Avenue big boys,’ the folks on Main Street again beg to differ,” says Moffatt.

Opinion on the impact of government policy on the ad industry has been tracked in the WPI Advertising Confidence Index since its inception. However, in June there was a dramatic increase in the negative view of the current and future involvement of government in the industry.  Globally, positive feelings about current government involvement in their business plummeted to 78 in June from 139 in March. However, the reason for the negative view depends on what region the agency operates in, Moffatt postulates.

“For instance, EMEA agency CEOs may see government-induced austerity measures as being a negative because it has drastically cut public-sector ad spending. In effect, government has become a smaller client for many shops, or stopped spending all together,” he said. “Agency CEOs in the U.S. may see increasing government debt and regulations—the inverse of the EMEA situation—as having a negative influence on clients and agencies. The US economy is less based on production and more on consumption, which continues to lag. If consumers are not consuming, client budget cuts are not far behind.”

Other key findings from the June WPI Advertising Confidence Index are that:

  • Globally, respondents say that their clients are feeling less confident about the current state of business conditions. That index is down to 115 in June from 131 in March.  Clients in Asia Pacific however, remain the most optimistic (135).
  • Those responding are also less confident about new business, as the index in June fell to 109 from 124 in March globally.
  • Respondents are also less optimistic concerning agency income in June. Globally, that index fell from 140 in March to 115 in June.
  • Not one CEO said that the global recession responded that she or he felt it was over. At best, 28% of them said it is “somewhat” over and 72% say it is not.

Despite the negative indicators revealed in the WPI index, Moffatt predicts a better longer term future for independent agencies. “Things are tough and indications are that in most regions, they will at best stay that way or get worse. However, economies like the one we are in tend to encourage consolidation, especially among the publicly traded global players. If one or two of the smaller players get gobbled up, then the small or mid-sized clients in those deals become even smaller fish and in time can feel ignored. Independent agencies then become increasingly attractive options for clients seeking attention and great work,” Moffatt says.

“Who knows? These hard times might eventually give rise to better days for independents in terms of new-business opportunities. It has happen before,” he adds.
The WPI Advertising Confidence Index is maintained by WPI, the world’s largest global network of owner-operated advertising agencies. In June, WPI polled managers from among the 91 agencies that comprise the network. WPI collectively employs over 4,900 people in 125 offices in 54 countries. In total, the network as $3.9 billion in clients budgets under management.

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