Amazon Gets Some Blame in Ad Industry's 24-Hour, $5 Billion Rout

(Bloomberg) -- The world’s biggest advertising companies have lost more than $5 billion of their market value in 24 hours and Amazon.com Inc. is getting some of the blame.

The market rout began Wednesday around midday in New York and spread around the globe after Paris-based Publicis Groupe SA said fourth-quarter sales fell unexpectedly because of a decline in business with consumer goods brands in the U.S. Publicis shares lost as much as 15 percent, their biggest intraday drop since the Sept. 11, 2001 terrorist attacks in the U.S.

Shares in its biggest rivals shed between 4 and 9 percent as the implications for the wider industry sank in. If consumer goods makers had less need of Publicis, the same may apply to WPP Plc, Omnicom Group Inc., Dentsu Inc. and Interpublic Group of Cos. After all, Publicis has been seen as an early mover in shifting to the new digitally-driven advertising that’s supposed to keep corporate marketing departments loyal to the old ad firms.

Mirabaud analyst Neil Campling said consumer goods companies can have as many as 25 ad agencies working for them and that looks inefficient.

“The key area hit is North America,” Campling said in emailed comments. “The combination of consumer packaged goods and North America for us points to the rise of Amazon more than anything else, offering a brand new channel for brands to connect directly to consumers.”

Amazon’s advertising revenue has been growing fast as it starts to give more prominent placement to sponsored products in search results, rather than those offering the lowest prices. Investors see the area as even more profitable than its main e-commerce business.

To contact the reporters on this story: Kit Rees in London at krees1@bloomberg.net;Angelina Rascouet in London at arascouet1@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Thomas Pfeiffer, John Lauerman

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