NEW YORK (AdAge.com) -- McCann Worldgroup accounts for around 40% of Interpublic's revenue -- as goes McCann so goes IPG, is an oft-used maxim on Madison Avenue -- and it's even been said that the real power at Interpublic lies with the CEO of that agency rather than the holding company. But that's changing.
While no holding company's results are pretty these days, Interpublic Group of Cos. last week posted particularly poor numbers, swinging to a net loss of over $35 million for the first nine months of 2009 from almost $60 million in profit during the same period in 2008. IPG's third-quarter revenue fell 18% compared to declines of 14.4% at rival Omnicom Group, 8.7% at WPP (factoring out the effect of acquisitions and currency shifts) and 5.3% at Publicis Groupe. WPP's reported revenue, including revenue from its big Taylor Nelson Sofres acquisition, rose 16.7%. In the same quarter, net income attributable to IPG tumbled 47.3%, more than double the drop of Omnicom (down 22.5%).
So far this year, IPG has cut some 5,000 employees, and, on a conference call last week, its executives warned that more-aggressive severance actions are in store for the fourth quarter. But besides getting smaller, the complexion of the holding company is changing, too.
Its main engine for so long, McCann, has sputtered like an old Buick in 2009. It's the agency that has borne the brunt of General Motors' bankruptcy. (IPG derived about 5% of its revenue from GM in 2008, although that was already down from 8% in 2005.) Although the agency is said to have a good chance of picking up the Cadillac account that's currently in review, it has lost several large chunks of Microsoft business. Cracks are also emerging in its relationships with megamarketers Pfizer -- Viagra shifted recently to independent McGarryBowen -- and Verizon, which also selected McGarry for its Android phone project. The U.S. Army contract will be up for review soon too.
Though McCann still controls massive pieces of business like L'Oréal and Mastercard, IPG has started to look to its other agency brands for growth. This has put CEO Michael Roth in the catbird seat as a strategist trying to figure out the future of this company. Recent moves such as fusing Deutsch and Lowe are examples of the kind of strings he can pull.
Meanwhile, other agencies are enjoying better times than McCann and gaining stature. Most notably, three years into its merger, DraftFCB is accumulating clout, holding down a client list of giants like S.C. Johnson, Kmart, Yum Brands and the U.S. census, expanding its relationship with Kraft and landing Miller Lite in 2009.
Executives familiar with the situation said DraftFCB could see single-digit revenue growth this year -- a major accomplishment for a global agency in a down year, one that might not be matched by any other player of its scale. Mr. Roth singled out the agency as the company's "top performer" in the conference call following last week's earnings report.
Shortly after that call, one senior executive at DraftFCB waxed about the possibility of a breakup of the holding company, saying they'd "never heard so much chatter" on the subject before. Breakup scenarios have resurfaced since the merger of Deutsch and Lowe. The new entity, in the view of some, creates a better-scaled offering for interested buyers in the event of a breakup.
Draft, Chicago, has now surpassed McCann New York as the company's largest, something Draft CEO Laurence Boschetto tacitly acknowledged last week when he labeled Draft's Chicago office "the largest holistic agency in the U.S." Globally, of course, it remains a different story.
Other agencies are also gaining on their big sister. The Martin Agency -- which has built a strong relationship with the country's leading retailer, Walmart -- seems to be forging one with Microsoft too, having just landed its retail-store account -- announced last week that it'd be adding an office in Seattle. Chatter about those shifts have executives like Draft's Laurence Boschetto and Lowe's Tony Wright in the ascendance, and, of course, reignited talk that McCann CEO John Dooner, 61, will soon name a successor.
Talk among senior insiders at IPG is that Nick Brien, the worldwide CEO of the company's MediaBrands unit, is the front-runner and that his candidacy benefits from the fact he's not a McCann Erickson insider. The other candidate for Mr. Dooner's post would seem to be McCann Worldgroup COO Eric Keshin, who is most-often cited as Mr. Dooner's heir apparent. No retirement plans have been announced for Mr. Dooner, 61, but he can certainly afford to go; based on a 2009 proxy statement, if he parts with IPG for any reason, the holding company is due to pay up $2.5 million per year for 15 years.
~ ~ ~
Contributing: Jeremy Mullman
Whispers of Caddy winnerThe day before car designer Bryan Nesbitt, the new general manager of General Motors' Cadillac, announced a formal agency review, the grapevine was buzzing that McCann Detroit, Birmingham, Mich., was hiring for the Cadillac account because it had already sewn it up. Mr. Nesbitt wasn't the one who flew to Boston to break the news of the review to its agency, Modernista, which declined to participate. That duty fell to his lieutenant, Steve Shannon, executive director of marketing, advertising and promotions at Cadillac, and Advertising Manager Meagan Stooke.
As it happens, Mr. Shannon is good friends with Garry Neel, president-CEO of McCann's Detroit-area office. The two men and their families spent a lot of time together as ex-pats in Zurich from 1997 to 2000, and their bond extends beyond the normal client-agency relationship. The pair remain close today.
Past history is also helping to fuel this latest rumor. In fall 2007, after moving from the head of Buick to head Saab, Mr. Shannon shifted the Saab account to McCann without a pitch from sibling Lowe, New York. McCann was on the brink of losing the Buick account after nearly 50 years in GM's consolidation move to Publicis Groupe's Leo Burnett.
GM was quick to throw cold water on the notion that it's already made up its mind. "Just because they worked together doesn't mean we'll end up with McCann," said a Cadillac spokesman. "We're doing an agency review."
GM's Bob Lutz, vice chairman-marketing and communications, also denied McCann is the shoo-in. "You know, there's this fiction going around that we're done with review and this is a done deal. It is not a done deal," he said. Mr. Neel called the talk "ridiculous" and declined further comment.