IPG's Michael Roth Is Not Concerned About New Entrants Into Advertising

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During the company's first-quarter earnings call Friday, Interpublic Group CEO Michael Roth said "increased competition" from adjacent industries is "not as evident to us as the headlines would have you believe."

Michael Roth
Michael Roth  Credit: Courtesy IPG

Traditional consultancies, like Accenture and Deloitte, as well as tech companies like IBM and Facebook, have been increasingly pushing into the advertising business. Roth said the holding company is "not seeing them in a big way," but when it does face them in digital pitches, IPG agencies "do pretty well against them."

"Our integrated offering and creative firepower is something at this point that gives us a strong advantage over those system integrators," he said. "Innovative thinking, our ability to reach across all agencies at IPG and strong creative talent coupled with our media side of the business is something that other providers don't have."

Roth, who noted on the call that Accenture is also a "great client" of the holding company, said some IPG agencies are going into the consultancy business in different ways. "R/GA is in business transformation, design capabilities and structural advice, so it's a logical extension that we have a relationship with these clients and know the business and we can bring to the table creative, innovative ideas," he said.

Five or six years from now, Roth said the landscape could change even more and IPG could potentially partner with some of these new competitors.

Despite macroeconomic uncertainty, geopolitical factors and the first quarter being "seasonably small" for IPG, with 2.7% organic revenue growth to $1.75 billion in the first quarter of 2017, Roth said he's confident that the holding company will deliver on its 3%-to-4% organic growth target for the full year.

In the U.S., organic growth was up 2.7% for the quarter, while international markets grew 2.2%.

Roth said Mediabrands, McCann, R/GA, Hill Holliday, Octagon and Golin led the company's top line growth in Q1, with digital offerings helping contribute to the overall success.

On the media side, he said the company's "transparent and agnostic approach" ensures that clients get the best, unbiased advice, which is "increasingly important in a world that is seeing greater concentration of power among media owners, as well as other challenges that have come to light in areas like digital measurement and brand safety."

Operating income was $29.7 million, compared with operating income of $23 million a year ago. Operating margin was 1.7% for the quarter, compared to 1.3% a year earlier. Net income was $21.5 million during the first quarter, compared to $5.4 million a year ago.

Roth also discussed diversity and inclusion on the call. "While we have made meaningful strides and lead the industry on many fronts, an area on which we are increasingly focusing is our ability to recruit, develop and promote people of color," he said.

The Advertising Club of New York and IPG recently hosted the first Summit on Black Women in Advertising to start a discussion and figure out solutions around the fact that there are fewer than 100 black women executives in advertising, PR and related industries across the country.

Incorporating a diverse set of perspectives and skills into client work will "allow us to best reflect and connect to the markets which we must communicate with in order to be successful," Roth said.

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