Agency Q4: IPG Places Hopes In Digital Services, Publicis-Omnicom Merger Might Be Delayed Until Q3

AgencyArtInvesting in new and existing creative and digital talent in 2014 will be a key development pillar for Interpublic Group (IPG), the holding company said in its Q4 call.

IPG revealed full-year 2013 revenue of $7.12 billion, an organic increase of 2.8% from $6.96 billion in 2012. Fourth quarter revenue was $2.12 billion, compared to $2.06 billion in the fourth quarter last year.

Fifty-six percent of IPG’s revenue comes from the US. The company has seen steady growth in Latin America, particularly from Brazil, as well as Chinese traction in the Asia-Pacific region.

“Our pipeline for future acquisitions is more global than US-based,” said IPG chairman and CEO Michael Roth on an earnings call Friday. “We’re not running away from continental Europe, but it’s 11% of our revenue, and if one client moves back, it has a more material impact on our results.”

Investing in talent and acquiring key agency additions in continental Europe, including IPG’s snap-up of UK-based shops Inferno and Profero, are two of the reasons why “we saw new improvements in business wins and feel confident about our pipeline going in to 2014.”

Additionally, IPG, which Roth says has “notable strengths in digital, media and marketing services,” will place an emphasis on the agency’s use of data and analytics to “promote accountability.”

One such area of investment last year was the MAGNA Consortium, through which IPG has expanded its programmatic media-buying discipline. The consortium, a late-summer alliance involving IPG’s media investment group MAGNAGLOBAL, AOL, Clear Channel Media and Entertainment, A+E Networks and Tribune, was formed to automate the purchase of media and data assets.

Roth called MAGNA Consortium’s efforts to build the “most comprehensive, scaled data stack” a catalyst for key client wins (such as The Hershey Co.) during the year.

However, a hit to IPG’s European business, which cost the advertising and media-holding company $60.6 million in pretax restructuring fees to offset “significantly lower revenues” than expected, dimmed the holding company’s earnings somewhat.

“A few of our businesses that saw revenue decreases did not cut costs fast enough against some revenue shortages,” Roth said. “Part of the [reason why] was we had some changes structurally in our agencies, and had added new leadership talent across strategic, creative and management.”

He noted that acquiring key talent will keep the agency competitive, but did allude to the fact that this, indeed, takes time and that results should materialize in 2014.

As a result of its restructuring efforts and ongoing expense and revenue discipline, IPG anticipates savings of $40 million moving into 2014, which is characterized by its stated focus on margin improvements. The company said a $300 million share repurchase program announced Friday reaffirms this.

Competing holding company Omnicom Group, which had its proposal for a $35.1 billion merger with French holding company Publicis approved last month by European regulators, may have to wait until the third quarter to execute the merger, its CEO John Wren forewarned on a Q4 earnings call Tuesday.

Omnicom revenues totaled just below $4.1 billion, representing a 4.2% increase in organic growth. The company, however, incurred $41.4 million in incremental costs for the full year as a result of the planned merger; Publicis hit some speed bumps in Q4, as it failed to meet its growth target and cited weaker growth in emerging markets, including China.


Zach Rodgers contributed.


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