GM $3.5 BILLION MEDIA ACCOUNT GOES INTO REVIEW
Incumbent Interpublic Group of Cos. Units Invited to Defend
By AdAge.com's analysis:
> GM paid Interpublic $45 million to $50 million in 2004 for U.S. media-buying services.
> Interpublic's fee on the assignment was 1.3% to 1.4% of measured-media spending.
> The U.S. media account represents an estimated 10% of Interpublic's GM business.
Interpublic hasn't disclosed fourth-quarter revenue. But full-year revenue, excluding foreign-currency shifts, should come in around $6.2 billion if the growth trend for the first nine months continued. The estimated $45 million to $50 million would be 0.7% to 0.8% of Interpublic's 2004 revenue.
10% of IPG's GM worldwide revenue
That would represent about 10% of Interpublic's GM-related worldwide revenue. While Interpublic hasn't disclosed 2004 figures, the holding company in 2003 generated about $487 million in revenue from GM.
In 2003, Interpublic derived 8.3% of its overall revenue from GM, Interpublic's largest client.
GM consolidated U.S. media buying at Interpublic in 1994. The automaker March 11 said it was putting the assignment in review in a shootout between Interpublic and GM roster firm Publicis Groupe.
At stake is the GM media account ($2.76 billion in 2004 measured media spending, according to TNS Media Intelligence) and GM dealer associations ($763 million). GM's estimated $45 million to $50 million in revenue for buying that media equates to a fee of 1.3% to 1.4% on the total $3.52 billion in measured-media spending. GM, to be clear, doesn't pay Interpublic based on a tracking service's spending estimates, but the calculation illustrates the clout GM carries as the nation's second-largest advertiser. Media-buying fees vary, but major advertisers tend to pay fees in the range of 1% to 2% of media spending.
An Interpublic spokesman declined to comment.
Given GM's imperative to cut costs, GM surely will pay the winner of this review less than what GM has been paying Interpublic.
Stock price dips
Interpublic's stock lost nearly 5% of its value March 14, falling 59 cents to $11.92 in heavy trading as investors digested news of the GM review.
In a statement this morning, Mr. Roth vowed to "mount a successful defense," noting Interpublic prevailed in a review last year of GM's $700 million European account. GM in December consolidated European media planning and buying at Interpublic roster shop Universal McCann, pulling work from Interpublic's Initiative and Aegis' Carat.
Mr. Roth's statement said he was responding to the "concern that the announcement of the U.S. review has created in financial markets." The stock dropped further in trading today, falling 17 cents to $11.75 in mid-afternoon trading.