Hasta La Creative!

Call it WPP Wednesday: Surprisingly weak second-quarter earnings and dour forecasts by the giant agency holding company sent its stock plummeting 12%, pulling other holding companies down 3-7%.

While many things are likely to blame, one of the biggest may be the transparency issue lurking behind mysteriously vanishing U.S. agency revenue. Holding company revenue in North America has been flat to down in recent quarters, running well below increases in U.S. gross domestic product and media spending. It’s a trend that started the third quarter of last year, just after the Association of National Advertisers issued its report from investigations firm K2 on media transparency.

“There is at minimum a coincidence between the timing of the release of the K2 report and the sudden deceleration in U.S./North America organic revenue growth for the holding companies, which began in the third quarter of last year,” says Pivotal Research analyst Brian Wieser. “It’s hard to believe that it hasn’t had some impact in terms of clients looking to tighten up contract language. This is reinforced by my conversations with marketers who have only recently learned about how their contracts have allowed for agencies to generate authorized but undisclosed markups. But I also think that a slowdown in spending on media from large marketers is at play, as is zero-based budgeting.”

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