Major advertising holding company IPG withdraws guidance for 2020 as coronavirus economic impact hits clients

• One of the largest advertising holding companies, Interpublic Group of Cos., said Thursday it's withdrawing its financial performance targets for full-year 2020 because of the impact of the COVID-19 outbreak.
• "In the past, some clients have responded to weak economic and financial conditions by reducing their marketing budgets, thereby decreasing the market and demand for our services," the company said in supplement the risk factors listed in its annual report. 
• The update comes the same week as Twitter and Facebook warned about advertiser demand as a result of the pandemic. 

Michael Roth, IPG CEO.

Michael Newberg | CNBC

One of the largest advertising holding companies, Interpublic Group of Cos., withdrew its financial performance targets for full-year 2020 on Thursday amid the increasing spread of COVID-19. Shares of the company, which has a market cap of just over $6 billion, were up nearly 4% Thursday morning. 

IPG is a holding company that owns creative, media, PR, experiential and other agencies operating in the advertising industry. Some of its agencies' major clients include Microsoft, Amazon and Burger King.

The advertising industry is bracing for a wider impact of any economic fallout on client spending, since marketing is often one of the first items that businesses cut during a financial downturn. Some brand advertisers say they're already dramatically reducing spend.

IPG said the outbreak has increased "financial and economic volatility and uncertainty," with a "continued slowdown or downturn in the economy" that is starting to, and will likely continue to, have have a negative impact on many of its clients. 

The extent the coronavirus outbreak will have on the company's business is "highly uncertain and cannot be predicted," Interpublic Group of Cos. said in an SEC filing.

"In the past, some clients have responded to weak economic and financial conditions by reducing their marketing budgets, thereby decreasing the market and demand for our services," the company said in supplementing the risk factors listed in its annual report. 

IPG said the macroeconomic uncertainty resulting from the pandemic, the unknown magnitude and duration of its impact led it to withdraw its previously issued targets for full-year 2020. 

"In the current environment, visibility into marketing and media spend is extremely challenging," Michael Roth, Chairman and CEO of IPG, said in a statement. 

IPG's update comes the same week as Twitter withdrew its revenue and profit forecast for the first quarter, citing the potential impact of the spreading coronavirus on advertiser demand. Facebook this week also warned that it's seeing a weakening in its ads business in countries taking actions to reduce the spread of COVID-19.

IPG competitor Omnicom Group also issued an update this week on the impact of the pandemic. It said it's continuing to evaluate the impact on its clients and operations and the impact travel restrictions, limitations on public gatherings, shelter in place orders and mandatory closures will have.

"These actions pose a risk that clients may reduce their demand for our services and could result in a reduction in our revenue, which would adversely affect our operations," it said.