Interpublic, which owns McCann, FCB and Mediabrands among others – unveiled a solid Q1 2017 with earnings (profit) of $21.5m, an impressive increase on the previous year’s $5.4m. Somehow or other IPG managed to reduce its quarterly costs by 58 per cent.
But revenue rose just 0.7 per cent, to $1.75bn with a 2.7 per cent increase in organic growth, nearly all in the US. Revenue outside the US dropped two per cent.
Currencies play a big part in this but it seems clear that, although IPG’s housekeeping is clearly functioning well, the company isn’t growing. The same applies to rival Publicis Groupe and may be the case when WPP, the biggest of the marcoms companies, reports its Q1 numbers.
In recent years IPG CEO Michael Roth (below) has eschewed the acquisition route favoured by WPP and Publicis and that will have played a part in the slowdown. But it’s clear that all the marcoms giants are struggling to find growth somewhere, anywhere, as the global economy stutters. China is no longer driving the world as it did and, for the acquirers, there’s not much left to buy.
They still need to keep shareholders happy though and maybe now they’ll start to shed some assets (as Omnicom did in Q1) or trade them with their rivals. They may also attract the attention of predators outside the industry who may fancy that they can extract more from the substantial revenues the marcoms giants still enjoy.
So let’s see if I’ve got this right … IPG’s 2017 Q1 earnings (profits) quadrupled from $5.4M to $21.5M and the company is slowing down? That overall revenues were flat at +0.7 % is no surprise, since positive U.S. organic growth of +2.7% was offset by a -2.0% decline in foreign revenue. Which, again, is not surprising since our domestic GDP growth, albeit modest, is stronger than most other global economies (many of which are in major decline). Moreover, revenue is a reflection of client spending, not agency performance. That is to say, any company can increase revenue by acquiring other companies. The real question after that being … “Are you making a profit?” And clearly, IPG is doing that quite handsomely. Bill Crandall, Founding Partner & CMO, Steadman Crandall Business Development LLC