IPG is floundering.
The agency holding company was roughed up in the first two quarters of 2023, and its organic revenue growth declined by 0.4%, with a 1.2% decrease in the US, according to an earnings report on Friday.
IPG shares dropped more than 5% Friday morning following its earnings call. The stock has plunged by a quarter over the past three months.
Tech, telco and digital advertisers have pulled back spend, which is still hurting performance to the tune of 3.2%, CEO Philippe Krakowsky told investors.
Digital specialist agencies Huge, R/GA and MRM continue to underperform, as do creative agencies. These losses offset IPG’s strong media growth and 6.5% growth in its PR and event agencies.
Health care remains a longstanding stronghold for IPG, Krakowsky said. The category formerly comprised about 15% of IPG’s total revenue, and “it’s now likely twice that.”
Can’t spell gains without AI
If IPG is betting big on one thing for growth, it’s AI.
IPG’s AI steering committee oversees partnerships and “hundreds of new AI pilots underway across the company,” Krakowsky said. The AI use cases that IPG is focused on are creative content generation, strategy and insights and chatbots to automate customer-facing tasks like program recommendations.
Krakowsky noted that experience agency Momentum Worldwide obtained three AI patents. Digital specialist agency Huge also came out with an “opportunity mapper” that forecasts the effects of generative AI on a client’s business and identifies growth opportunities.
On the health care side, Acxiom, IPG’s data management arm, launched a health vertical to expand its marketing data business. Buttressing the quality of those audiences is an identity resolution cloud app, Acxiom Real ID, that launched this week.
Is it enough?
Whether IPG’s investments in AI and the Acxiom data business will be enough to turn the struggle bus around remains an open question.
In the past, agencies have undergone “cycles of transformation” every four to five years, Krakowsky said. But the prolonged cutbacks from tech clients and the speed of change in digital advertising make it particularly difficult for agencies to “reboot or reinvent.”
It might also be that the holding company model as we know it is due for a makeover. Former IPG-owned UM Worldwide execs Joshua Lowcock and Arielle Garcia recently departed, slamming the holding company model on the way out for being “shackled to the industry status quo.”
The investments in AI may help some agency workers while creating “efficiencies” elsewhere. Which is to say, getting rid of people.
“There’s clarity across our group in terms of how their incentives are very directly aligned to our results,” Krakowsky said of the company’s employee headcount. Strong performers shouldn’t hurt the bottom line.
To everyone else, good luck.
