IPG had a bumpy second quarter.
The agency holdco’s organic revenue growth sank 1.7% YOY, with a 2.5% drop in the US, the holding company told investors during an earnings call Friday.
Tech companies in particular, which have been a fast-growing advertiser category, reduced spend, and continued economic uncertainty dragged down IPG’s performance, said CEO Philippe Krakowsky, who acknowledged that the company was “disappointed.”
Shares for IPG fell more than 12% Friday morning.
Digital specialist agencies Huge and R/GA continue to underperform and are “in turnaround mode,” Krakowsky said.
Earlier this month, Huge laid off 37 employees, or about 3% of its workforce, and hired a new global client president. And R/GA laid off roughly 15% of its US staff, or more than 100 employees, in April.
IPG may also be looking to fold on Kinesso, a centralized data and identity service built out of Acxiom.
Though tech and telecom categories are currently “under a lot of stress,” with its share of IPG’s net revenue dropping from about 15% a year ago to 12% this quarter, Krakowsky thinks they will recover. Tech has a small group of super-sized companies that are each slashing marketing budgets and laying off employees, which can affect the overall numbers. But tech is “a big category for us in the long term,” he said.
How long term are we talking? That’s anybody’s best guess, but the drag from tech, telco and digital “will likely be with us for most of the year,” Krakowsky said. “They’re clearly going through something that is more protracted than any of us thought.”
Stiff competition
While other areas proved unstable, retail loomed large on the earnings call.
Earlier this week, IPG rolled out a business unit called the Unified Retail Media Solution. This move comes after launching its Creative Commerce Labs in June, with the idea of producing more addressable and shoppable content.
As for AI, Krakowsky said the company is starting to use AI for commerce use cases, especially for user support or product recommendations.
But AI isn’t ready to create finished work yet. It’s more helpful with early-stage ideas or, notably, for data-driven targeting and modeling (e.g., the kind of people and specialist agency groups IPG cut back this quarter).
After all, Krakowsky added, predictive and machine learning capabilities have long played a role in “precision and data-heavy parts of the business.”
Now, machine learning may go from playing a role to running the show.
