Michael Roth might have seemed an unlikely candidate to be running one of the world’s “big four” advertising groups in the early 2000s. The 73-year-old former tax attorney had little knowledge of advertising when he was selected to sit on the board of New York-based Interpublic Group (IPG) in 2002, during what had been described as one of the most difficult periods in the company’s history . After a few years of helping the firm turn things around, Roth was elevated to the role of chairman and CEO with the aim of strengthening IPG’s financial health and restoring its investment-grade status, which he clearly did.
IPG’s stock has risen from about $13 when Roth took the helm in 2005 to roughly $22 today. In fact, IPG is a standout among its peers, the others being Omnicom, Publicis and WPP. IPG’s net profit in the first half of 2019 rose to $161 million, a 23% jump compared to the same period a year earlier. Its revenue grew 11% to $4.3 billion. In a recent visit to Singapore, Roth gave an interview to Forbes Asia to discuss his vision for his company’s future in the midst of disruptive change in the industry.
FORBES ASIA: What is IPG doing to adapt to the changing landscape and address new entrants in your industry?
Roth: There's no question that there are too many people chasing a limited amount of revenue. So the value-added proposition is something that we focused on from a strategic point of view. We want to be the holding company that everybody wants to work at and clients want to do business with. I know that sounds easy, but given how crazy our industry is, we actually have a reputation for exactly that. The reason for it is because of a diversity and inclusion emphasis, but more importantly, our client centric focus on bringing all of our brands within IPG to meet the needs of our clients in what we call an open architecture structure. And what that means is our clients are entitled to the best of IPG no matter what silo, what agency within IPG is necessary to meet those requirements.
So the consultants, they do business transformation. So do we, but they don't do media. They don't have the creative capability. The Facebooks and Googles, they don't really descend to our media business. Our media businesses actually outperform the rest of our businesses.
Does your open architecture model create any conflicts of interest, and how are you executing this concept better than others?
If you look at the history of our industry, it's based on a series of hundreds of acquisitions of desparate businesses all competing with each other. That makes no sense. So 14 years ago we embarked on this getting rid of the nonstrategic assets, focusing on open architecture in terms of meeting the needs of the marketplace and adding to our portfolio offerings that make us competitively different in the marketplace. We've actually been outperforming our sector for the past at least three years, arguably five years, depending on how you look at one year in terms of organic growth as well as margin expansion.
Asia has the largest population in the world. It has one of the largest advertising markets in the world. We have over 10,000 people in Asia Pacific working for us. We have multiple international clients. And all of our brands are pretty much represented in APAC.
I'm here to meet our people and meet our clients, and show that we're investing in APAC. There are a lot of issues these days about trade and all that sort of stuff. We're not shying away from the industry. We’re investing in the industry and the message that I'm getting is-- we’re here, we're open for business and we have great talent and we plan on being here. We view this as a market that's growing and we want to make sure we're competitive.
63% of our businesses is in North America. Asia Pacific is 10% of our business. The U.K. is 8% of our business, continental Europe is 9% of our business. We have a very strong presence in all the different markets. And that's not by accident. We're a global company and clients come to us because we're a global company.
IPG made its biggest acquisition in 13 years. What’s special about Acxiom?
Last year we bought Acxiom, which is a data and analytics company, the best in the business, for $2.3 billion. The future of our industry is based on our ability to help our clients find the right consumer with the right message.
Two-thirds of its businesses is in first party data management. The rest is basically being able to target a right consumer with the right offerings and having the right creative. So if you couple the open architecture with our data and media capabilities, it's an integrated offering that competitors can't possibly offer.
You don't buy companies just for the sake of buying them. You buy them when you need, need them strategically. Acxiom was on our wish list for a couple of years actually. And finally when they became available, we bought them.
What are some key clients in Asia and how do you tackle Asia’s fragmented market?
Pharma is pretty big in Asia, for us, healthcare is probably strong across the board.
We have a strong presence in India in terms of our brands on media business as well as our creative. It's very client specific. If you look at our APAC numbers, Japan is up double digits. And one of the reasons is we won a pretty nice size client in Japan.
In China it's very much project oriented. It’s a more difficult market. First of all, the dollars are smaller and they're fickle, but that's the market. So we build our business based on that. Each of our brands have representation in each of those markets. We have a strong presence in these different markets. And that's not by accident. We're a global company and clients come to us because we're a global company.
Social media belongs in-house, but there's certain aspects of the business we maintain. There are certain aspects of programmatic buying that some big companies can do in-house, but the relationship with the media owners, the insights that we bring to the table, the technology that we are constantly investing in and buying, these companies can’t do that. So we work with them. So yeah, we help them bring it in-house, but they still use us to help them navigate it.
More importantly, we’re the only a holding company that has a brand safety expert on the media side of the business. So all they do is focus on where media gets placed and the safety of the way that media is shown. So there's a value add to what we do.
When you look at global campaigns, we have production facilities all over the world and they operate 24/7. It's hard for them to bring it in-house and be as efficient and frankly have the quality that we can bring to the table.
How are you advising clients who are navigating turbulence in the face of geopolitical and economic uncertainty?
If you go spend money, we can move the needle, and we can prove that we can move the needle. I used to not be in this industry, and most companies, including the company I used to work at, when business was difficult, they'd cut their marketing dollars. Now, I'm a convert.
When business is bad, you don't cut your marketing dollars, you increase your marketing dollars. Cause we can prove that what we do actually works. The enlightened CEOs and CMOs in the market understand that. It's the wrong strategy to cut marketing dollars when you're trying to grow margins and revenue.
Have you had to become more flexible on billing your services due to the current macro environment?
Many people think it starts with procurement and the cheapest provider is what wins. The big sophisticated companies know how to price our business. They're more interested in your capabilities and once you have the capabilities and you have the big idea, then they turn it over to procurement, then you get involved into fee negotiations like we've done for years, it's nothing new.
Now are there unusual acts by some of our competitors to gain market share by pricing irrationally? Well, what do you think? If we're outperforming our sector and they have zero growth, and last year we had 5% organic growth and this year we'll probably do 3% organic growth and they're still at zero. If they win business and they still had zero growth, what do you think they're doing?
On the media side of the business, we only buy as agents for our clients. There is no secret profit that we're making. We're totally transparent with our clients, which is another reason why we're outperforming our competitors. We let clients audit our contracts and we let them audit our buying. It doesn't take long for clients to realize you get what you pay for.
