IPG on recovery road but media still a problem – should CEO Roth offer a deal to Dentsu’s Carat?

More evidence has emerged that the US is the place to be if you’re a marcoms company, with Interpublic benefiting (as has its bigger rival Omnicom) from the strength of the American economy.

IPG’s third quarter figures show revenue at $1.84bn (compared to Omnicom’s $3.75bn) and a profit of $89.7m (Omnicom made $239m). So, on these numbers, Omnicom is twice as big as IPG and about two and a half times more profitable.

Given IPG’s performance in recent years, though, these are much better numbers and should keep the wolf – in the shape of activist investor Elliott Management which has bought a 6.7 per cent stake – from the door for a bit longer.

IPG CEO Michael Roth (left) did warn though of losses which would hit in the final quarter of 2014 – most likely the loss of Microsoft’s whopper media account outside the US, which has gone to Dentsu’s Carat. IPG Mediabrands, the company’s over-arching media outfit that controls Initiative and UM, is looking pretty sickly outside the US.

Roth also warned of the ‘black box’ of programmatic media buying (ten per cent or so of IPG’s media business). Clients, he implied, were in full scale revolt against agencies carrying out these dark arts, effectively buying on their own account and selling on to clients. He said IPG didn’t do this, although it does in its barter division Orion, but his warning shows that agency media buying activities are under increasing pressure from suspicious clients. Rival WPP has already restructured some of its media buying activities, formerly carried out in-house via its Xaxis data company.

IPG still looks vulnerable to a bid but not necessarily from one of its marcoms rivals (WPP, Omnicom, Publicis Groupe, Dentsu/Aegis and Vincent Bollore’s newly-energised Havas). Private equity firms are increasing their holdings in adland; most recently Lake Capital with its successful bid for UK marcoms outfit Engine.

Roth’s next challenge, now that McCann and FCB (formerly Draft) have stabilised is to fix his media operation. Media buying margins may be under pressure (programmatic again) but media is still required for a full-on marcoms company.

Might he consider pooling forces with Carat owner Dentsu/Aegis outside the US? A joint venture maybe? That would make sense, if the regulators would allow it.