Interpublic CEO Says His Holding Company Is Not a Brand

AAF Speech Addresses Holistic Integration, Stock Drop and Compensation Models

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SAN FRANCISCO ( -- Interpublic Group of Cos. Chairman-CEO Michael Roth may head one of the world's largest advertising companies, but he told attendees yesterday at the American Advertising Federation convention here that he doesn't look at his holding company as a brand.
Interpublic Group of Cos. Chairman-CEO Michael Roth
Interpublic Group of Cos. Chairman-CEO Michael Roth

"We are not a brand. We don't pretend to be a brand, and frankly we shouldn't be a brand," Mr. Roth said.

In his view, the holding company should act as a facilitator, making policies, providing resources, improving collaboration and supporting financially its brands -- that is, its individual agencies.

Changing and evolving
Though he's not promoting Interpublic itself, Mr. Roth said he is out to see that the individual agency brands work much more closely together than ever before.

"The world is changing. We have to evolve with that," he said, adding that Interpublic has initiated internal compensation programs to encourage Interpublic agencies to work with each other for the benefit of clients.

But it's not only agencies that need changing; so do clients.

"Everyone talks about holistic integration, but when I meet with clients and present what we can do from an integration point of view, they think it's terrific but in the end want to see a 30-second spot," he said.

He said compensation models, now largely focused on TV, also will have to change. "Right now we are so focused on cost and where those costs are that we are losing sight of the real value we are bringing to our clients. Frankly, our clients are losing sight of the value of what we are delivering."

Stock tumble
Mr. Roth also discussed his company's recent stock tumble, the result of what he called an innovative letter of credit to reduce borrowing costs. "I expected the stock to drop. The activity on the stock was totally a result of the unique structure of it. I expect through the rest of the year it will level off when the impact of this transaction is understood in the marketplace."

Mr. Roth was referring to a complicated new borrowing arrangement the company announced June 5 for a $750 million line of credit that includes warrants for Interpublic stock. The deal over time could dilute existing stock by increasing the number of outstanding shares. The Street reacted negatively to the announcement, sending the stock to its lowest point since March 2003 on a day with the second-highest trading volume in Interpublic history.

Interpublic fell to another three-year low yesterday, when Mr. Roth spoke, and the stock dropped even further this morning to $8.75. Interpublic's market cap has fallen 8%, or $336 million, since it unveiled the financing move.

Big changes
Mr. Roth's comments on the second day of the AAF conference came after Dan Rosensweig, chief operating officer of Yahoo, detailed some of the changes that have occurred on the internet.

Rosensweig said international growth of the internet is far outpacing America's. Fifty percent of those outside the U.S. accessing the internet are doing so without ever touching a computer (instead using cellphones and other devices), he said. Users are no longer consumers but publishers and distributors, as they go from reading web pages to distributing pictures and blogs to friends.

Online ad dollars have topped $31 billion a year, he added, but ad spending still lags, under-represented for the amount of time people spend online.

Keith Reinhard, chairman emeritus of DDB Worldwide, told the more than 700 attendees that marketers are increasingly turning from looking at consumers as targets to looking at themselves as guests in a consumer's home.
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