After a tough second quarter, IPG’s Chairman & CEO Micahel I Roth was positive on the company’s performance in the third quarter. Sure enough, IPG outperformed competition and India grew by 19 per cent. Roth is bullish on the holding company’s future in this market
We want to be the best in everything that we do. Big is good, but I would rather be the best: In a nutshell, that statement explains Michael I. Roth’s thought process when he takes decisions that decide Interpublic Group’s future in the global communication business. As Chairman and Chief Executive Officer of the Interpublic Group (IPG), Roth’s responsibility is to ensure that the company achieves the targets it sets out for itself. And despite a tough second quarter, 2011 has turned out to be a good year for IPG, more so for IPG in India. In India, IPG is far ahead of its global competitors that include the likes of Publicis Groupe and Omnicom. Second only to WPP, IPG agencies in India -- McCann Erickson, Lowe Lintas, DraftFCB Ulka, Lodestar UM and Lintas Media Group to name a few -- boast of a legacy and a strong year-on-year performance. Some of the most respected names of the Indian communication business, from Lynn de Souza (CEO, Lintas Media Group) and Shashi Sinha (CEO, Lodestar UM) to Prasoon Joshi (Executive Chairman, McCann Worldgroup) and R Balki (Chairman & Chief Creative Officer, Lowe Lintas), belong to the IPG family. As Roth takes stock of IPG’s footprint in India, he says, “It is a nice place to be in.” But his plans ahead, and his expectations from India, are more aggressive now than ever before.
A Good Year
IPG’s third quarter profits for 2011 hit US$ 208.1 million, which was more than quadruple of what it was in the same period last year. This was partly thanks to the company’s sale of a portion of its stake in Facebook, but even outside of the Facebook sale, IPG showed strong performance with operating income topping US$ 173 million in the quarter, up an impressive 73 per cent from the prior period. In the first nine months of 2011, IPG’s revenue was US$ 4.9 billion, which was up 9.8 per cent compared to 2010, a growth rate that leads the industry. Roth recalls, “The only tough part of the year was the second quarter. But if you look at the third quarter, we outperformed everyone. I refrain from saying ‘I told you so’. In the second quarter, we missed by 26 million US$, and some of it was timing. But I stuck to what I had said I would do for the full year. I had said that for 2011 we would do 4-5 per cent organic growth or better, we would be between 9.5 and 10 per cent in terms of margin and we are on track to deliver that. If you look at the beginning of the year, and then the end, we have done exactly what we had said. There may be something in between but you cannot do this business on a quarter-by-quarter basis. And while all the other noise can keep going on out there, we just have to keep our heads down and deliver. And in our case, when you deliver results, you see it in our share prices.” In the third quarter, India has grown by 19 per cent. For the nine months period, India grew over 20 per cent. Roth elaborates, “This is significant, but we would like to see this grow further. Right now, 60 per cent of our revenue is from North America, 20 per cent from Western Europe and 20 per cent from the rest of the world including Latin America and Asia Pacific. That number used to be 14 per cent, and it is growing in double digits. If you see where growth is coming from, you will know how the 14 per cent went to 20. It is not as big as I would like it to be, but it is growing.” Roth articulates a simple action plan that he believes will lead the India market to deliver on IPG’s expectations.
The India Plan
To ensure the growth trajectory of IPG agencies in India, one of the first things on Roth’s list is to ascertain the growth of existing client base. He says, “There is so much of organic growth coming from existing clients. We want to make sure that we keep that relationship and continue to grow those clients. The second is the focus on new businesses.” He cites McCann Worldgroup’s recent wins of General Motors and Aircel in India. Across its offering of advertising, PR, healthcare, rural and design, Lowe India added 80 new businesses, including the creative duties of corporate such as Videocon D2H, Suzlon and Birla Ultratech, in 2011. Both Lintas Media Group and Lodestar UM registered a double digit growth year in India. DraftFCB Ulka saw its share of wins well. Roth remarks, “We just have to make sure we are giving al of our resources here in India, access to all the different resources we have around the world.” Unlike most of its competitive companies that have multiple brands in the media agency space, IPG has not synergised its buying in India. In other markets, IPG’s buying discipline Magna has been active for a few years. Roth informs that the situation was considered time and again for India too, but IPG did not feel any immediate need to execute this in this market. “If the agencies here were at a disadvantage, Magna would be here already. Because our media agencies in India are still able to show scale and buy efficiently, so there is no need to change anything right now. Why fix something that is not broken?” Acquisitions continue to be on the company’s radar, but Roth clarifies that IPG would be interested in whatever is available and what makes sense to it. “We don’t have to do a Mudra or buy an integrated agency. We need to build on our existing agencies. When we look to acquire or grow, we do it local agency up. If McCann or Lowe or DraftFCB see an opportunity, where they are working with an agency – digital or traditional – and they have a good relationship, they bring it up with us.” An example of this was seen last year, when Reprise formed a partnership with Interactive Avenues that had been working with Lodestar UM in India.
IPG 2012 focus
Roth is clear that 2012 will see IPG’s continued investments in emerging markets and a sustained focus in the digital space and new media. A big development in this direction was seen last week when IPG Mediabrands, the media innovation unit of IPG, unveiled the IPG Media Lab in New York. IMPACT readers would recall IPG Mediabrands’ CEO Matt Seiler’s vision of Media Lab from a previous interview. Reiterating Seiler’s view, Roth points out, “Our Media Lab is a good example of our commitment to the digital space and to talent. We would continue to add talent to all our different disciplines.” For Roth, Mediabrands has been a tremendous success so far, and 2012 would show more results of efforts made this year. “Mediabrands is in the forefront of new media, which is necessary in the marketplace today. The structure that Matt has put together for the G14 markets that include India, and the use of Initiative and UM within those markets, is the right way to go about it. We would have to deal with conflicts and be able to align our agencies at the same time. But our agencies are better served as a result of that, in terms of servicing their clients. Our resources are fine-tuned, so we don’t have to double up on everything. We don’t have to make disparate investments and just focus on expertise.” The other clear area to keep an eye on in 2012 is the transformation of McCann Worldgroup at a global level. The agency has recently seen change in leadership in Nicolas Brien, better known as Nick Brien, and a slew of senior appointments. According to Roth, the year ahead would be an exciting one for McCann Worldgroup. Roth concludes, “We have three global networks; there was change in leadership in all of them; and I am very happy with the direction they are taking. There are many opportunities, especially in markets like India, and IPG agencies are well poised to contribute to these markets and our clients here, and grow by growing them.”
‘We owe our clients the best of IPG’
Michael I. Roth, Chairman and Chief Executive Officer, Interpublic Group, is very clear on what is driving the global communication business and what the growth opportunities are for the likes of IPG. As competition intensifies in India, Roth has a game plan in place to ensure IPG’s growth. In this conversation with IMPACT, Roth speaks on issues that when addressed, make all the difference to a company in particular, and to the industry at large. Excerpts:
Q] The growth of the communication business has seen the rise of the specialists. But somewhere in the process, coordination between different units ceased. What is your advice to your agency units on collaborating for the client’s needs?
We owe it to our clients that they get the best that IPG has to offer. If our agencies need something and if it is there within their networks, that is great. But if they don’t have it within their own network, then they should be reaching out to IPG. Our clients are demanding the best that we have to offer, and that is what we have to focus on. Shame on us if we have an expertise and we have not brought it to our clients and our competitor is offering something that frankly is not as good as what our services would be. At the end of our operating meetings, I have our business unit heads take our top 10 or 20 clients, depending on the network, and show which are the disciplines that are serviced to our top 10 or 20 clients. And if we are not seeing a cross-section of all the disciplines, I want to know why.
Q] Amongst all the disciplines – creative, media, digital - which do you think would lead the ommunication exercise in the future?
The digital and media agency businesses are the shining spots, but you cannot do that without the big creative idea, which is why everyone has to work together. It really is an integrated offering and if you can get them to work together, it is amazing. Just seeing all of them together, collaborating and executing an idea, is fantastic.
Q] In India, IPG’s new media offering is not yet as strong as some of the other holding companies. What is your overall approach towards digital?
All of our networks -- McCann, Lowe and DraftFCB -- have to have digital capabilities. We also have specialists like RGA and MRM, which are huge. MRM on its own would be the fifth largest in the world. So, we have expert digital brands and we reach out to them when we need unique capabilities, but digital is ineverything we do.
Q] Clients, however, are not yet looking at mainline agencies like McCann or Lowe as their first choice for digital requisites...
If it lingers that way, it is a concern, but I think you will see it change. If you would look at the people we are hiring, you will notice the effort is to grow internal digital capabilities so our clients will begin to look at us for their digital needs too. If they don’t, then we are not doing our jobs well.
Q] As an industry, do you think enough has been done to groom talent?
We have not done a good job at all. At IPG, we have made some investments in universities in the US and Shanghai, but largely, right now we are trading talent with each other and we are paying up for people moving within the agencies. That is not healthy. We have to develop our own talent and go to the schools ourselves. So far, we are doing a decent job of pushing the industry forward and making it attractive to young talent, but we need more of it.
Q] IPG has taken an interesting initiative for women in the Women’s Leadership Network, and it’s been a while now that you have been talking about it. Any results already?
Cannes Lions was the first time any agency had done what we did with WLN and the reactions that we have seen from clients, as well as our competitors, have been very positive. When I had first taken this job, I felt that we were not doing a very good job of the whole issue of diversity and inclusion. It was very important for this to be a part of our DNA as an organisation. All the different affinity groups within IPG are having good traction. It has helped us with people and with clients, because clients are also focussing on this. I finally had it included as a financial objective for our network agencies to move the needle on diversity and inclusion.
Q] We tend to hear a lot of conversations at the media holding company level – IPG, WPP, Omnicom ...
Do you sit down and view your business like that?
Only when Martin (Sorrell) talks about it! At the end of the day, we want to be the best in everything that we do. Bigger is good, but I would much rather just be the best.
