We are now deep in the 2Q reporting season, so far there has been mixed performance especially amongst the global marketing holding companies.
Both IPG and Omnicom missed expectations. For IPG, although there was an improvement in 2Q compared to 1Q, organic growth remained in negative territory at -1.7%, slightly better than the -2.4% seen in 1Q. On the other hand, Omnicom experienced a slowdown in organic growth, dropping from 5.2% in 1Q to 3.4% in 2Q. Both companies attributed their performance to a slower tech (and telcos for Omnicom) sector. The picture painted by their peer Publicis is a very different story. Publicis managed to maintain its stellar growth of 7.1% from 1Q into 2Q – this was attributed to new business wins and a diverse revenue mix, with its data and tech units, Epsilon and Sapient, showing strong performance. Publicis upgraded while Omnicom maintained and IPG trimmed its full year guidance. We look to hear more from the rest of the holding companies in the next week or two. Elsewhere, Twitter's path to recovery is proving to be challenging, AI companies are exploring the use of "synthetic data" to train Gen-AI models and following ANA’s investigation last week, more actions are being taken by ad tech companies against made-for-advertising sites.
News of the week
Twitter remains cash flow negative
Elon Musk revealed that Twitter's cashflow remains negative due to a significant decline of nearly 50% in advertising revenue and a heavy debt burden. Musk's expectation in March that Twitter would achieve positive cashflow by June fell short. Twitter did not see the increase in ad revenues that they had anticipated in June, however Musk suggested July is looking more promising. So far, the aggressive cost-cutting measures implemented since he acquired the company have not been sufficient to achieve positive cashflow. He previously stated that most advertisers had returned to the platform, but the recent situation suggests that Twitter's ad revenue recovery will not be a simple task. The platform has faced criticism for its lax content moderation, leading to the departure of several advertisers concerned about their ads appearing alongside inappropriate content. In addition to this, is the emergence of Threads (Meta’s challenger product to Twitter) launched early this month, which is gaining traction. To further add to its problems is the new lawsuit against the company claiming it owes at least US$500m in severance pay to ex workers. The Guardian, Reuters
AI companies explore synthetic data to train models
Artificial intelligence companies like Microsoft, OpenAI, and Cohere are exploring the use of synthetic data, or computer-generated information, to train their AI systems known as large language models (LLMs). Currently, LLMs are trained primarily by scraping the internet and using human feedback to fill gaps in the information. However, as generative AI software becomes more sophisticated, there is a shortage of easily accessible and high-quality data to train on. The AI companies are also facing scrutiny over the amount and source of personal data used by their technology. Synthetic data addresses these challenges by using AI models to produce text, code, or more complex information, which is then used to train advanced LLMs. The belief is that synthetic data can preserve privacy while maintaining statistical integrity and reduce biases and imbalances in existing data if well-crafted. However, critics caution that training AI models on their raw outputs could degrade the technology. Despite potential risks, AI researchers see synthetic data as a potential catalyst for super intelligent AI systems capable of ‘discovering new truth’. FT
Ad tech industry ramps up crackdown on made-for-advertising sites
Ad tech firms like Magnite, Sharethrough, and PubMatic are cracking down on made-for-advertising sites (MFAs) and blocking them from their platforms. These sites designed solely for ad purposes display low-quality content and could disrupt user experience, pose security threats and waste advertisers' funds. This move was prompted by the recent investigation launched by the Association of National Advertisers (ANA) into MFAs. While some ad tech companies, such as The Trade Desk, have made efforts to address this issue, there was previous minimal resistance from many ad tech groups given the benefits created from the extra inventory provided by MFAs. Buyers on the demand side are also starting to take more notice and are looking at ways to combat the issue. An example being the recent collaboration between programmatic media buyer MiQ and ad tech firm OpenX to remove MFAs from all their direct-sold deals. Digiday
Ofcom report shows young adults consume news mainly on social media
Ofcom, the UK media watchdog, recently published a report on UK news consumption, based on 4,556 online and in-person interviews. The study reveals that a significant two-thirds of young adults now get their news exclusively from social media. Instagram and TikTok have emerged as the primary news sources for the 16 - 24 and 12 - 15 age groups respectively. Interestingly, one in ten adults now turn to TikTok for news, surpassing BBC Radio 1 and Channel 5 in popularity for the first time. Despite BBC One remaining the most popular single news source, it has seen a gradual decline in users over the past five years, as social media platforms gain traction. However, this shift raises serious concerns over trust and news reliability. News on social media tends to be more entertainment-focused, and could be misleading or incorrect due to the lack of editorial control. FT
ITV no longer pursuing All3Media
ITV has announced that it is no longer actively exploring the acquisition of All3Media. The company had expressed interest in June, but there was no certainty regarding a potential transaction. No reasoning was given by the change in decision but ITV stated it “assesses all potential value-creating M&A opportunities against its strict financial criteria and disciplined capital allocation framework”. All3Media is the London headquartered producer behind popular shows such as "Gogglebox" and "Call the Midwife." It was acquired by Liberty Global and Discovery acquired All3Media in 2014 for £550m in 2014. The asset was put up for sale by owners, with JP Morgan overseeing the deal, which was rumoured could generate over £1bn. Liberty Global has a 9.9% stake in ITV, valued at £280m. ITV, Variety
Other news
• Ascential's WGSN lost 3 key bidders with at least one potential buyer now. Reuters
• Commerce publishers deliver good results on Amazon Prime Day. Digiday
