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French advertising company Publicis Groupe SA (PUB.FR) Wednesday said it aims to remain ahead of its rivals in 2009 after it reported a smaller-than expected drop in first-quarter organic revenue growth as digital growth helped to offset media budget cuts in other areas.

Paris-based Publicis, the owner of Saatchi and Saatchi, reiterated that it aims to post the best margin of the sector in 2009 despite a steep revenue decline in the automotive sector, one of its key markets.

The company said it will continue to manage costs tightly to achieve this goal after it started laying off staff at its U.S. agencies last year, due mainly to the decline in the auto market.

"Staff cuts are becoming significant," Chief Executive Maurice Levy told reporters in a conference call. So far, staff-related reductions in Europe have been limited to a hiring freeze.

Publicis didn't provide a guidance figure for the rest of the year, but Levy said the advertising market is expected to deteriorate further in the second quarter before hitting the bottom in the summer.

"The second half of the year should look better and a recovery could start mid-2010," Levy said in a briefing with journalists.

"We feel that we will do better than the market in 2009," Levy added, after Publicis' ZenithOptimedia unit earlier this month forecast a 6.9% decline in the global ad market this year.

Organic revenue growth, a closely watched metric in the advertising industry that strips out acquisitions, disposals and currency movements, was down 4.4% in the first three months of the year.

This figure was above an average drop of 5.1% in organic growth forecast by five analysts polled by Dow Jones Newswires.

U.K.-based rival WPP Group PLC (WPP.LN) Tuesday posted a 5.8% drop in organic revenue.

At 0812 GMT, Publicis shares were up 3.1% to EUR22 as analysts welcomed the group's performance.

"The numbers are encouraging, especially in the U.S., which is by far the group's largest market," said Kepler Capital Markets analyst Conor O'Shea.

Revenue for the first quarter was EUR1.08 billion, up from EUR1.06 billion a year ago, and above analysts' expectations of EUR1.06 billion.

In North America, revenue declined 3.6% on an organic basis, outperforming Europe.

Still, the automotive sector, a key industry for Publicis, is in steep decline and down "nearly 20% at constant exchange rates," Publicis said. The company, which counts General Motors (GM) and Renault SA (RNO.FR) among its clients, now makes about 13% of revenue from the segment, down from 15% last year.

Publicis said it still aims to derive 25% of revenue from digital and 25% from emerging markets by 2010. At the end of March, digital, which still posted 9.8% organic growth in the quarter despite the downturn, accounted for 20.5% of Publicis' revenue. Emerging markets accounted for 21.1%.

Publicis said net new business in the first quarter was $1.7 billion, after it won large advertising contracts for French retailer Carrefour (12017.FR) and China Mobile (0941.HK) in January.

The stock has gained about 16% since the start of the year, outperforming a 4% drop of the French SBF120. Analysts say the agency is better armed to weather the downturn because of its size and large exposure to digital and emerging markets.

Company Web site: www.publicisgroupe.com

-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 40; ruth.bender@dowjones.com