Michael I. Roth, Chairman and CEO of the Interpublic Group, gives India a thumbs up, says IPG will continue to invest in the country, poised for significant growth due to expansion of its middle class and bright economic outlook
By Rashi Bisaria and Henna Achhpal
Global advertising and marketing solutions holding company, the Interpublic Group (IPG), may have had a slightly disappointing 2013 globally, but that doesn’t deter the group’s Chairman and CEO, Michael I. Roth, from being optimistic about its prospects, especially in India. In fact, the last year for IPG in India was characterized by 17% growth, consolidation, big business wins and a significant acquisition in the digital domain, all pointing to a healthy progress report. Earlier this month, Roth was in New Delhi with the company’s board of directors, to hold up to them the India operations of IPG agencies and showcase the potential and strengths of India. Over the last two years, the group has had a stronger focus on the Indian marketplace and an increase in revenue growth in the Asia-Pacific region, all the more reason for Roth to continue to bet big on India.
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2013: DISAPPOINTING FOR IPG GLOBALLY
Despite revenue gains in the fourth quarter, net income fell at IPG last year. Revenue grew 3% in Q4 to $2.12 billion and 2% for the year to $7.12 billion. Compared to the same periods in 2012, on an organic basis, revenue rose nearly 4% in the quarter and about 3% for the year. That said, net income for 2013 slid to $259.2 million from $435.1 million in 2012. The company ended 2013 with an operating margin of 8.4% – down from 9.8% at the end of 2012, well short of the company’s goal of a double-digit margin. Commenting on the company’s performance, Roth said during a recent investor call, “The primary reason we did not achieve our goals were the problems in Europe. We took a restructuring charge of $61 million to right size our cost profile. We took care of some of our agencies that were not performing well by restructuring, which is why we could not deliver the margin we were looking for. These restructuring charges should give rise to $40 million benefits in 2014 and growth in the range of 3-4%. We expect to expand margin by at least a 100 basis points with 10.3% margin or better.”
A BRIGHT FUTURE IN INDIA
Roth’s visit to India with the IPG Board of Directors is indicative of his optimism about India. He has commented that even in tough conditions “India has grown at a rate of 5-6%, which is good. In the United States, growth is around 2-3%”. Ranking second in the Indian market, after WPP, IPG has seen a total growth of 17% in India, with an organic growth of 6% and is poised for further growth. Asia Pacific is the group’s largest international region and Roth is upbeat about India, stating that in the last four years, the market for IPG in the Asia Pacific has grown by 42%, while India has grown by 74%. “A large part of this has come from organic growth,” says Roth, who believes all agencies under IPG in India have the creative expertise needed to be successful in the current market. “We have seen solid growth from them. India is a great marketplace for us. Given the continued expansion of the middle class in India and the country’s projected economic growth, this is a place we have invested in and will continue to invest in,” he adds.
THE ADDED POWER OF ACQUISITIONS
Two years back, IPG restructured its operations in India to boost growth in the country. The company saw three acquisitions — the digital agency Interactive Avenues, public relations firm Corporate Voice and End to End Marketing Solutions, a database marketing company. The acquisition of Interactive Avenues, a full service digital agency, was announced on March 6, 2013.
This acquisition aims to cement IPG Media Brands’ position as a leading digital buying unit, strengthening the networks’ digital capabilities in India. Following the acquisition, Interactive Avenues became a part of the MediaBrands Audience Platform (MAP). Weber and Shandwick, ranked among the top public relations agencies in the world, is the public relations arm of IPG. After holding a 40% stake in Corporate Voice for 16 years, Weber and Shandwick acquired the remaining 60% from local partner, MAA, in February, 2013. Lastly, in April 2013, McCann Worldgroup India acquired Bangalore-based direct and database marketing firm, End To End Marketing Solutions. About these acquisitions, Roth says, “Asia Pacific as a whole is an important market for us but our recent acquisitions in India go to show our support to the opportunities in this market.” On whether there are more acquisitions lined up in the future, Roth adds, “We are always looking for acquisitions in various markets.
We want to hear from our agencies on what’s substantial on the horizon. For us, digital and activation seem to be the two most important areas of interest. That is one of the reasons we came here.”
IMPLEMENTING THE IPG SOLUTION
According to Roth, clients now expect the best across disciplines which is something IPG is striving to provide. He says the company is trying to be the single source vehicle which can integrate all expertise to provide the best marketing solutions to its newly acquired clients as well as ones with which it has a long-standing relationship. In 2013, the company participated in four RFPs (Requests for Proposal) dealing with an IPG solution. Roth is proud that out of the four, IPG won three. “This shows that we have the resources and ability among the group to work together, with a single client in mind, to provide the best solution across all disciplines,” asserts Roth.
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“There’s nothing about being bigger that makes for better creative ideas, or leads to better integration of marketing disciplines, which is what our clients need most in order to succeed in today’s complex media and consumer landscape. Like with any significant market development, this change could create opportunities and challenges. But we know both Omnicom and Publicis well, so competing with the merged entity and winning is not something we’re unfamiliar with. Nothing is as important in our business as deep client focus, which has nothing to do with whether an agency is large or small, or how it’s organized, and everything to do with a culture which values and promotes service.”
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