WPI Agency CEO Survey Reveals What's Really Happening

Release Date: 01/27/2009

2009 Budgets Slashed 15% or More Say Agency CEOs
In New Worldwide Partners CEO Survey

WPI CEOs Sense That Client Outlook is Glum for ‘09

DENVER—Seventy percent of the chief executive officers taking part in the latest “Worldwide Partners Inc. Agency CEO Survey” said that their clients will cut their 2009 budgets, with over 83% of that global group saying those cuts were at least by 15%, and separately 48% of the global respondents say it will take at least 18 months for business conditions in their respective markets to improve.

The CEO’s surveyed also said that the vibe that they are picking up from clients about their outlook for 2009 is gloomy. Of the global respondents asked if their clients were more or less optimistic about 2009, 95% of agency CEO’s said their clients were less optimistic. Among North American CEO’s said that 94% of their clients were less optimistic about the 2009 business climate, and for non-North American CEOs that figure was an overwhelming 96%.

Digital was one of the few bright spots in the survey, with half of the global CEOs citing it as a growth area in 2009. Among North American CEOs, 62% said that they think digital will grow this year, while 39% of non-North American CEOs cited it as a growth area. Traditional print and broadcast were cited as growth areas by a minute section of the sample in any region.

Those are some of the findings of the most-recent “Worldwide Partners CEO Survey” which was conducted during the week of January 12 2009.

“Last July’s survey hinted that things could get worse before they get better,” said WPI President and Chief Executive Officer Al Moffatt. “This latest report indicates we were right given our streetwise framework and intelligence. If our interpretation of what clients will do in ’09 is right, budget cuts will at least be double what the mainstream pundits in our industry are prognosticating and the economic malaise will last longer than they expect. The ‘money bubble’ has burst and there’s been nothing to soften the shock.”

Of the 83 CEOs responding, 34 were in North America and 49 were in markets in Europe, Africa, South America, the Middle East and the Asia Pacific region. The agencies range in size from $5 million to $500 million in capitalized billings and are all partner agencies in WPI, which is the world’s largest privately held owner-operated advertising and marketing services agency network with in excess of $3.9 billion in advertising budgets under management globally.

Among other findings in the survey, although 38% of CEOs on a global basis said their clients had presented traditional annual budgets for 2009, 52% of the CEOs globally said that clients had instituted a “pay as you go” system for projects to augment or replace annual budgets. While such project-based compensation schemes are not uncommon in emerging markets, 34% of North American CEOs said that such a remuneration scheme is in place in 2009 and 62% of non-North American respondents said clients are availing of the option this year.

“It is unusual for North America to see such a drift away from an annual commitment, but it is not surprising that clients want more control over their budgets and will reserve the right to adjust to whatever competitive opportunities or challenges arise,” said Moffatt. "Worldwide Partners is perfectly suited for today's budget-conscious clients, given our entrepreneurial, bottom-up structure that has little network overhead coupled with the highest-quality networked local agencies."

While bracing for client budget cuts in excess of at least 15% in 2009, 49% of the global CEOs said that they anticipated that their full-time staff count would remain the same this year, while 36% of North American respondents anticipated cutting full-time staff. However, 45% of North American CEO’s hoped to maintain full-time staff levels. Among non-North American CEOs, 39% said that they expected to lay off staff and 53% said they expected to maintain full-time staff positions.

In terms of clients spending in 2009, a resounding majority of North American CEOs said that their clients will spend 15% less. Of those North American respondents, 29% of the CEOs said budgets will be trimmed 15%; 14% said the clients will be scaled back by 20% and 29% of the CEOs who responded said that their clients will cut in excess of 20%. Among non-North American CEOs responding, 25% said their clients will cut budgets by 15%; 42% estimate that clients will cut budgets by 20% and 17% said their clients will cut budgets by more than 20%.

According to Moffatt, the responses to the survey presage a move away from the “global village” concept. "As clients' budgets continue to decrease, we’ll see a proliferation of local and regional brands due to the lack of resources for large international footprints. This will herald the emergence of local entrepreneurs bringing new ideas to stale and downtrodden marketplaces,” he said. “We think WPI’s emphasis on local markets, augmented with the support of the network regionally and globally, will help clients wrestle with the changing advertising market and maximize returns. Wasting time, money and effort in agency bureaucracies is no longer an option.”

The complete survey and regional breakdowns is available in the “Media Room” on worldwidepartners.com.

Contact:
Al Moffatt, President and CEO, Worldwide Partners, Inc.
+303-577-9765
alm@worldwidepartners.com

Editor’s note:
About Worldwide Partners, Inc.
Worldwide Partners, Inc. (WPI) is the world’s largest owner-operated advertising and marketing communications network made up of 98 agencies employing 4,900 people in 145 offices located in 57 countries across Asia, Europe, Latin America, the Middle East and North America. Based in Denver, Colorado USA, WPI is owned by the partner agencies that make up the network. WPI exists to explore and capitalize on global business development opportunities with multinational clients for its partners and to act as a hub that harnesses the creativity, local expertise and resources of the agencies in the partnership and apply them to solve problems for clients on a local, regional and international basis. This allows partners to expand their existing client relationships geographically and to compete effectively for international new business. Clients gain access to best-in-class, entrepreneurially driven agencies steeped in local knowledge in all markets they engage WPI shops. WPI’s partner agencies manage in excess of $3.9 billion in advertising expenditures. Clients serviced in five countries or more include Avon Global Fragrance, Ciba Vision, Guardian Industries, Lehman Brothers, Walden University and Wal-Mart Centroamerica.

See full survey results here