Marketers’ demands for reductions in the fees they pay their advertising agencies could delay a rebound in financial results for Madison Avenue, according to a story in the Wall Street Journal.
Advertising companies have historically lagged behind in economic recoveries, but this time their rebound may come even later, and be less convincing, because big marketers have not only slashed their spending, but also cut the fees they pay for services, according to a story in the Wall Street Journal.
Written by Suzanne Vranica, the story says that big marketers, including American Express, General Motors and Royal Dutch Shell, have cut back on the fees they pay ad firms, a shift that could dash recent predictions that an ad recovery is in the offing.
Second-quarter results due Thursday from ad giants Omnicom Group and Publicis Group are likely to underscore the trend, the story says, warning that investors must brace for a steep decline in organic revenue.
The story says that marketers have slashed the fees they pay their agencies by 5 percent to 30 percent, with some companies even asking that fees be reduced retroactive to January 1.
WSJ Online subscribers may read the full story here.