Media Stocks Down in 2011 But Not Out for 2012

Despite a tumultuous year for stocks thanks to the European debt crisis and an American debt freak out in August, the major stock indexes ended 2011 virtually unchanged. The same cannot be said for the media advertising industry. Whether it was agencies or media companies, many publicly traded media businesses had a year they would rather forget.

Advertising agencies. Fears of a double dip recession and the potential of reduced spending on advertising hurt agency shares in 2011, leaving all of the major holding companies in the red for the year. WPP (-15%), Publicis Groupe (-12%), Havas (-18%) and MDC Partners (-21%) all suffered double digit percentage losses. The Omnicom (-2%) and IPG (-8%) losses were somewhat less severe.

There is reason to be optimistic about agency performance going forward, however. Most agency stocks were up sharply in the 4th quarter of 2011. Some of the big agency holding companies have a significant footprint in growth markets like China and India and are well positioned for the future. And 2012 will likely see an increase in ad spending, thanks in part to the Summer Olympics and US Presidential election.

Media companies. Unlike the agencies, there were some media companies that had a standout year. CBS was up a whopping 42%, Viacom up 14%, Time Warner up 12% and Google up 8%. Even News Corp, which battled an insidious phone hacking scandal for most of the year, was up 10%.

But for every gainer there were a number of losers. The companies behind the three major internet portals, AOL (-36%), Yahoo (-3%), and Microsoft (-7%), all suffered in 2011. More traditional companies like Scripps (-18%), Gannett (-11%) and The New York Times (-22%) also got clobbered.

IPOs. Despite some initial euphoria around LinkedIn’s initial public offering, most of the media companies that floated in 2011 were down by the end of the year. LinkedIn (-33%) Demand Media (-70%), Pandora (-42%), GroupOn (-21%) and Zynga (-1%) were all off their first day high.

The good news is that next year we will see the most successful startup created in the last decade, Facebook, finally go public. Also, Glam Media, which acquired social network Ning in 2011, is well positioned for an IPO during 2012.

M&A. Despite the trouble with agency and media stocks this year, the mergers and acquisitions market proved profitable for a number of media and ad tech startups. Google bought Admeld for a whopping $400 million, while AOL bought The Huffington Post for $315 million and Yahoo picked up Interclick for $270 million. These three acquisitions not only said a lot about each acquirer, but they also put a combined billion dollars into the pockets of the acquired’s founders, employees, venture capitalists and their limited partners.

2011 also marked the announcement that Donovan Data Systems and MediaBank would merge to form the world’s largest operating system for advertising. Currently pending Department of Justice approval, this merger could streamline how agencies plan and buy media.

While 2011 was a down year for most publicly traded agencies and media companies, the signs appear better for 2012.