Big advertising companies cutting thousands of jobs

Two of the world's largest advertising companies, Omnicom Group Inc. and Interpublic Group, are cutting thousands of jobs in the face of an advertising downturn that is shaping up as the worst since the Internet bubble burst in 2001.

Battling an industry-wide slump caused by a pullback in spending in the all-important automotive, financial services and retail categories, Omnicom Group Inc. will cut four per cent to five percent of its worldwide staff by the end of this week, according to a source close to the situation.

The cuts amount to 2,800 to 3,500 positions out of a worldwide headcount of about 70,000.

Sources close to Omnicom rival Interpublic Group say its agencies are also considering targeted cuts, following promises by chief executive officer Michael Roth to manage the business "conservatively" in the face of the downturn.

Mr Roth told investors in October that the parent company of DraftFCB, McCann Erickson, Lowe and dozens of other agencies would remain "extremely focussed on controlling costs and managing margins" as the financial crisis weighed on spending.

For now, sources estimate that job losses at the Interpublic agencies will amount to less than five per cent of the worldwide staff, meaning no more than 2,000 jobs.

At Omnicom, the job cuts began last week and will be completed by the end of the week, according to a source. In a statement, Omnicom said: "Given current economic conditions, our companies have reviewed their staffing levels as they relate to their current business requirements. Some, but not all, will have to make adjustments."

Omnicom, which has posted some of the industry's best results in recent years, is home to high calibre agencies BBDO Worldwide, PHD and DDB Worldwide.

Their client list includes premier companies such as Procter & Gamble Co, AT&T Inc, McDonald's Corp, Apple Inc., Adidas AG, and Visa Inc.

But spending cuts are coming from all marketing areas as corporations try to keep costs low. Chrysler, the automaker which has said it needs a cash infusion to survive, is also a top client of Omnicom's BBDO.

Overall, ad industry experts expect US ad spending to decline by about five per cent next year, the biggest drop in eight years, and said that the marketing industry may not recover before 2010.