New York-based Interpublic Group (IPG) is one of the “big four” advertising agency networks, competing alongside WPP, Omnicom, and Publicis Groupe.
The company — which owns agencies such as McCann, R/GA, IPG Mediabrands, and FCB — ended 2015 on a high, posting better-than-expected organic growth for the year. It reported its first quarter earnings on Friday, beating expectations on both revenue and earnings, with a 6.7% rise in organic revenue.
It was also one of the big winners of one of the major events to hit the ad industry last year: “Mediapalooza,” where an unprecedented number of big-name brands put their media-buying accounts up for review.
So it was fitting that IPG CEO Michael Roth was in a jovial mood when Business Insider caught up with him at Advertising Week Europe in London earlier this week.
We discussed a range of topics including how he’s feeling about the year ahead, his favoured buyer for Yahoo, and why Arianna Huffington has told him off.
Business Insider: 2015 was quite a year for IPG, not least with everything else going on in the market, like Mediapalooza, the macroeconomic environment. IPG’s organic growth not only outgrew other companies in your sector, but exceeded your own expectations as well. So what are you expecting going into 2016?
Michael Roth: Hopefully it’s not as hectic as it was in ’15. Some of my competitors seem to think that ’16 is going to be as crazy on the media side as 2015 was. I don’t believe so. What I said was: “Unless they know something I don’t,” like they have clients that are looking …
BI: Are you talking particularly about Maurice [Levy, the Publicis Groupe CEO who has predicted a Mediapalooza Part 2 — albeit smaller than Mediapalooza Part 1]?
MR: Yes exactly. And sure enough he started out with a problem, you know [Publicis was the agency group considered with the most to lose during Mediapalooza.]
We’ll have a couple of big reviews, hopefully they won’t be ours who are participating, but I just don’t sense it to be as active as it was in 2015.
BI: It was quite fruitful for yourselves, winning Coca-Cola and others?
MR: And J&J, CBS, we retained Sony. It was a good year for us in 2015, yes.
BI: There were quite a lot of structural changes with your competitors in 2015. Others, like WPP, have been active on the acquisition front. Do you expect any big changes within IPG?
MR: We are always looking for acquisitions. We spend $150 million to $200 million a year on acquisitions and, interesting enough, in 2015 we did a number of PR acquisitions which were great, including one in China, which was terrific.
So our pipeline is actually pretty healthy right now and in the digital space or in the markets where we want to strengthen our presence … but nothing of any significance in size.
As far as restructuring, we have been operating under this open architecture now for 10 years.
It’s kind of interesting now to see Maurice [Levy] restructuring and Martin [Sorrell, WPP CEO] talking about his special-purpose agencies.
We have been operating on the assumption that our clients are entitled to the best offerings that IPG has, and absent of conflict, we pick and choose the best talent and we bring them to the table on an integrated basis. I think that’s the way clients are looking to us to help them solve their issues and so we have been operating now for 10 years.
BI: It seems like quite a lot of agency networks seem to be following the IBM model of: digital agency/management consultancy/systems integrator. You it notice in the pattern of where the acquisitions are going. Is that a model that you follow?
MR: First of all, we never siloed digital from the rest of our business. We have very strong digital-specialist agencies like R/GA, Huge, and MRM, but digital is in every agency we have. Weber Shandwick and Golin on the PR side, all of our agencies have digital competency. So we never segregated the digital offering, except when we needed some specialist digital capabilities, which we brought in under our open architecture model.
I think what’s happened in the way we’ve been operating, with this fully-integrated offering, whether it be media, whether it be creative, digital, experiential, all of it has to be brought together in a seamless way for our clients. That’s what the open architecture enables us to do.
So the IBMs, they are looking to just spread out. Everyone thinks they can come in and enter our space, but they don’t bring the depth and breadth of offerings that we do.
BI: That’s what they say about you.
MR: Yeah, well, they’re wrong.
BI: One of the things Sir Martin Sorrell quite helpfully does each year is he lists out how much his agencies are spending with the biggest media owners. Last year, Google was $4 billion, Facebook was $1 billion, more than is spent on traditional networks, except Fox. Are you noticing a similar pattern?
MR: We have more than enough scale to have a seat at the table, so we have a presence and of course Google and Facebook, if we’re not looking at them as part of the solutions, we are not doing our clients a service.
The interesting part is are there other avenues of distribution where we can distribute content and develop a relationship with our clients and with consumers in a different way and, frankly, that’s the challenge that we have.
Certainly the Googles, and Facebooks, and Instagrams, and Snapchats are all avenues that we have capabilities and arrangements with and they’re part of the puzzle.
BI: Do you spend a similar ratios?
MR: I think Google, Facebook yes, they’re the biggest players.
BI: Today (Monday, April 18) is the deadline for bids to be submitted for Yahoo. What’s the best outcome for you? It’s been reported some people on Madison Avenue want Verizon to acquire Yahoo to create an entity to rival Google and Facebook.
MR: Well, frankly, Verizon is a client of ours, so I’m rooting for them! Unless of course I have another client that’s competing for it!
The point is it will still be another avenue of distribution and we look at what’s the best distribution vehicle for our clients with respect to what we’re trying to accomplish, whether it’s sitting in a Yahoo, or a Google, or Facebook, or who owns them. I don’t think it’s going to matter as much as the offering itself
BI: Is the offering at the moment good enough on its own?
MR: Obviously Yahoo is not. What is interesting with AOL is it’s part of Verizon and it certainly has an attractive offering that we utilise, so hopefully with Yahoo would be similar.
BI: One of the other big over-arching advertising topics that has certainly had a few high-profile cases this year has been diversity in the industry.
IPG has been no exception with what happened at Campbell Ewald (IPG fired the agency’s CEO and a staffer who sent a racist email to colleagues inviting them to take part in a “Ghetto Day”) the ongoing JWT discrimination suit (in which the agency’s now former CEO is accused of making racist and sexist slurs — allegations he denies.) What are holding groups like yourselves doing to ensure there are less of these cases happening?
MR: When I first joined the industry I felt as though diversity and inclusion was not properly reflected in the industry, so 10 years ago we embarked on diversity and inclusion being a core part of the DNA at IPG.
It’s now to a point where our agency heads are held accountable for improvements on diversity and inclusion. When I mean accountable, I mean it affects their bonuses. And we have in fact enforced that to a point where, since we embarked on this program, we have had an improvement of over 50% of manager-level people representative of inclusion and diversity goals over the past 10 years. There is more work to come but I think we’ve made it our DNA.
The other part of it is that we have a zero-tolerance for it. As reflected in the Campbell Ewald [incident.] The second I heard about this, we took action. Not only with respect to the individual who wrote that email, which was offensive, but the individual who was responsible for him, and I took action on them. There was no hesitancy on my part, as opposed to some others.
And, frankly, I was very proud of the fact that I received both internally and externally a lot of comments appreciating how swiftly we acted in that case and our people were very much appreciative of it because they knew it was part of our core.
BI: What is it about the advertising industry that is different to other sectors when it comes to diversity issues?
MR: When I challenge individuals they say there are not enough candidates that are interested in the field, and so on.
Intuitively, that does not make sense. I don’t accept that as an answer when we go over this. We have to do a better job of reaching out and, in essence, selling the career path that we offer. It’ s a great career path.
We are in the marketing and communication business. How can we not represent the consumer?
And, by the way, on the gender side, 80% of all purchasing decisions are made by females. So if we don’t have a fair representation just on the female side, we are missing the boat.
But as far as people of colour … the same is true. Hispanic is one of the largest growing populations in the world. How can we not be representative of that in terms of the talent? And our clients are demanding this.
BI: 2016 is a big year in the US, with the presidential election …
MR: Is there an election going on?
BI: It can pass you by. Where do you see this going. This time next year, who is going to be your president?
MR: I have no idea.
BI: What will work best for an ad agency network like yours?
MR: Obviously whatever candidate is more of the pro-business, economic recovery, economic stimulation …
BI: Who is that right now?
MR: I will let the readers decide on their own who that is. But certainly I think the world can use a steady force with respect to the macroeconomic environment as well as the threats of terrorism.
BI: How does the Donald Trump campaign, and the media circus that accompanies it, affect your industry in any way? It certainly improves viewing figures, for example.
MR: What’s happening in the US, in the local TV market, they are crowding out advertising because they are buying up all the time. That is interesting for us because we have to find other outlets that are efficient for our clients, so in a way, that’s beneficial to us.
We don’t represent any particular client on that, we don’t want to tick off any particular client reviews with one candidate versus the other. We are agnostic really.
BI: The ANA (Association of National Advertisers) report (investigating kickbacks and rebates in the advertising industry) is due to come out in spring. What do you think will be the outcome of that and how have you found the process so far?
MR: I don’t know what the process has been so far. I know they have retained two firms to work with them. I hope that if they find anything they are not going to taint the entire industry with potential wrongdoings.
I am very comfortable with how IPG approaches it. We are agnostic in terms of where we place our media, we do not have any economic interest in the media placement, and we dealt with the issue of rebates 10 years ago.
So all of our contracts have provisions that dictate where rebates are available, the client dictates how it’s handled. And in markets where rebates are not legal, we do not participate.
BI: Does ad tech and the globalization of media foggy this issue somewhat? Particularly the idea of arbitrage in ad tech?
MR: We don’t do that. That’s what I meant by saying we do not have any economic interest in the outcome.
This full disclosure on some of this stuff, I understand where clients can feel like they are not being well-served. That’s why we don’t do it. I’d rather not have that issue on the table.
BI: And then there are the issues of viewability, ad fraud, ad blocking, so on …
MR: Those are legitimate issues. You don’t want to pay for something that’s not real and I think everyone’s got to do a better job. Part of that is a technology issue. We want to make sure whatever we are running is being seen by real people as opposed to robots.
I think it’s relatively new and we are still learning a lot. Certainly from the ad industry perspective, nobody is intentionally doing that. Maybe some of these publishers are intentionally doing that, but that’s not what we are all about.
BI: You flew in to London from New York this morning. You have offices all over the world. You’re in a different country each week. What’s your tip for not just collapsing under exhaustion?
MR: A lot of coffee. I’m actually going back to New York right after this. I love that. I tell the people on the plane: “I’ll be back!” I stay on New York time.
BI: So you’re up very early right now.
MR: That’s OK. I’ll get back and have a good night’s sleep. I’m lucky, I’ve been doing this my whole career pretty much and my body so far seems to handle it OK.
BI: Do you work on the plane, or use your time to do something else?
MR: When I’m coming to London, I sleep on the plane — hopefully — and when I’m coming back I do what I just did. I take a quick shower and a shave and here I am.
BI: How much sleep do you need to operate at a reasonable level?
MR: Probably four to five hours?
BI: Arianna Huffington would be very disappointed with you.
MR: I know, she’s told me that.
BI: By travelling all around the world you must see some really exciting companies and technologies and trends. Is there anything new out there that’s really exciting you right now?
MR: I think this whole virtual reality, augmented reality, I think that is going to be a fascinating space and we are just at the touch of it right now. I think that will be a real interesting place to keep an eye on.
Of course we are still not where we have to be on mobile. So I would say keep your eye on both of those.
BI: Are you doing anything specifically around VR and AR? I can imagine R/GA have some plans …
MR: R/GA yes, but also Huge, and our specialist digital agencies are all looking into it, and our media players are involved. We want to be ahead of the curve in terms of representing our clients and bringing new ideas. But it’s still very new.