IPG Q1: Roth Claims “No Rebates” In US And Totally Transparent Contracts Detailing Rebates Abroad

ipgearnAgency rebates were a common theme during holding company earnings calls this week, with both Publicis and Omnicom fielding kickback questions from investors earlier in the week.

On Friday during IPG’s Q1 call, CEO Michael Roth found himself under the interrogation lights.

“This whole issue is not new to IPG,” Roth said, adding that IPG began reflecting rebates in its client contracts 10 years ago to boost transparency.

In the United States, he claimed, there are no rebates. But abroad is a different story.

“In those markets where there are rebates, we’re in fact encouraged by our clients to get as much buyer rebates as possible and our contracts are clear that those rebates belong to our clients,” he said.

In a research note, Brian Wieser, senior analyst at Pivotal Research, said IPG’s historic focus on contract compliance should be “relatively helpful” as the rebate debate rages on.

“A relatively smaller media agency division vs. peers also means that IPG is less exposed to the issue to begin with,” Wieser wrote. “However, the noise we expect from the industry will be negative sector-wide and may contribute to more aggressive negotiations between marketers and agencies more generally.”

IPG revenue increased 2.4% YoY to $1.68 billion from $1.64 billion in Q1 2014. The effect of foreign currency translation was negative 4.4% during Q1, but the impact of net acquisitions had a positive effect of 1.1%

Its organic revenue increased 5.7%. On Thursday, WPP posted a 5.2% organic growth rate, Omnicom reported a 5.1% organic growth rate and Publicis Groupe reported only 0.9%.

Roth pointed to IPG’s recent investment in Samba TV, and to its radio automation efforts through Cadreon, as a signal of ongoing investment in programmatic.

“We do see a significant rise in programmatic and we have been rolling that out on a global basis because we think it is a very efficient and effective way to handle video, certainly on the digital side of the business,” he said. “We’ve entered into all these agreements with various cable operators and with radio now. All of these are related [to] having the right data to place the media dollars in the right place to reach the right people in an efficient way.”

But investors wanted to know how willing traditional media owners are to opening up more inventory to programmatic buying.

“It’s going to be difficult for premium content on TV to be put into that fold,” Roth responded, citing the challenge of negotiating premiums. “The marketplace will determine whether or not that happens. We may see it but we’re not seeing it right now.”

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