IPG's Roth Touts Agency Value, Pay-Per-Performance Model

by Steve McClellan, Sep 19, 2012, 4:52 PM

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In August, reports surfaced that Publicis Groupe was going to acquire the Interpublic Group of Companies. Both companies denied it and the rumor turned out to be false. IPG CEO Michael Roth, speaking at the Goldman Sachs Communacopia Conference in New York Wednesday, said he currently does not see signs of further industry consolidation at the major holding company level.

Roth listed the key reasons for such big mergers, including a need for capital, a gap in a company’s offering, such as digital or media services, or an offer from a proposed buyer that is priced so high it’s deemed to be the best way to improve shareholder value.

“I haven’t seen it,” said Roth. “I don’t see a reason for it for us or the other holding companies,” he added.

Despite signals from media giants like Google and Facebook that they’d like to encroach on some of the services provided by agencies, Roth said he doesn’t see that happening in a big way either. “They won’t be agnostic,” he said. “And that’s what we provide,” meaning an unbiased view and guidance about how marketers should spend ad budgets, as well as coming up with “big ideas” for content and messaging across all channels.

“That’s our value added,” said Roth.

Recent and future changes in the business are driven by the consumer, he said. “It’s all about content and the relationship between the consumer and the product.” He believes agencies are in the best position to foster that relationship.

As marketers continue to demand greater efficiencies from all vendors, agencies have to continuously rethink their business methods, said Roth. For IPG shops, a couple of trends are developing. One is the increasing adoption of compensation models based on pay-per-performance.

“We’ve been successful with it and would like to see it expand,” he said. But implementation is challenging because every client has a different idea about what metrics define “performance.” Sales-based performance is an “obvious” choice, but doesn’t really work for new product launches. But there are many alternative performance metrics to base compensation on, including brand recognition and both geographic and brand penetration.

“You need to get to a meeting of the minds,” with the client, he said.

Demands for integrated strategies are also forcing standalone digital agencies to evolve, Roth said. He cited RG/A, which started as a pure-play digital agency, but which now also offers consulting, PR, creative and experiential marketing services. The same is true of pure creative shops. He noted that McCann and Deutsch now have well-developed digital capabilities.

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