Tech clients are breaking up with ad agencies

In 2023, the American workforce probably saw more slashes than A Nightmare on Elm Street, with several sectors, including the tech industry, laying off scores of workers as part of widespread cost-cutting measures.

Over in ad land, major agency holding companies felt the squeeze, too. Several holding companies reported a pullback in ad spend from tech clients in the fourth quarter and FY2023 earnings.

We broke down below how some are responding to the loss of business and looking ahead to the rest of 2024.

WPP: The holding company’s integrated creative agencies were hit particularly hard by the tech ad spend pullback, according to its FY2023 earnings call, where it described a “broad-based weakness in technology client spend.” In particular, agencies AKQA, Wunderman Thompson, and VMLY&R reported “lower spend from US tech clients and delays in technology-related projects,” the company shared in its earnings presentation.

It’s not all bad news: WPP won business from tech and telecom clients like Chime, Verizon, and Adobe last year, and it is also continuing its generative AI partnership with Nvidia, which reported a 265% YoY surge in revenue during its earnings call last week. WPP execs said they are optimistic about the tech sector despite the recent bumpiness.

“It’s too early to call it a recovery of the tech sector, but certainly it feels like that’s stabilizing,” WPP CFO Joanne Wilson told investors.

IPG: “Austerity among clients in the tech and telecom sector” had a significant impact on IPG’s recent overall growth, according to the company’s Q4 and FY2023 earnings call. Budget reductions and terminated assignments on the part of tech and telecom clients hit the holding company’s consolidated organic growth by approximately -2.5% during Q4, the company shared with investors. While noting that it’s hard to predict the timing of an upward trend in tech client ad spend, the tech and telecom sector seemed to stabilize in the fourth quarter, CEO Philippe Krakowsky told investors.

“A return to growth for us in this sector has not been factored into our plan for 2024,” he said.

Dentsu: Dentsu, however, is anticipating tech ad spend growth in2024: The company expects to soon “see a return to spend from technology clients, particularly in the US market,” Hiroshi Igarashi, IPG’s president and global CEO, said in an earnings release.

Dentsu is expecting the growth—at least for it—to arrive in the second half of 2024. Deal sizes “as we come into this year…are up modestly” in the tech sector as well as more broadly, Michael Komasinski, CEO of Dentsu Americas and group president, data and technology, at Dentsu, told investors.

Omnicom: The agency seemed to have an easier time with tech industry pullback despite “uncertainties in the macroeconomic and geopolitical environment,” John Wren, Omnicom’s CEO said on the holding group’s Q4 and FY2023 earnings call. Its tech clients generated 8% revenue in Q4 2023 versus 10% in Q4 of 2022, a slight decline.

“I don’t think in our prior calls we’ve been moaning too much about the impact that technology’s [pullback has] had, whereas our competitors have had much greater hits,” Wren told investors.