• by Steve McClellan , November 8, 2011

For those looking for a sense of how rattled -- or not -- marketers are about the uncertain macroeconomic outlook and how it might affect future ad spending budgets, Interpublic Group CEO Michael Roth seems to suggest a wait-and-see approach. He spoke to investors at a Wells Fargo Conference on Tuesday.

That's certainly true in comparison to 2008, when spending activity did not begin to decline sharply until the last month of the year.

“In 2008 -- which is obviously what everyone is nervous about -- we didn't see a pullback until December, and then it basically stopped,” he noted. Strapped-for-cash marketers slashed ad budgets because they had nowhere else to turn to raise money, said Roth.

But Roth insisted that “it doesn't feel like 2008 for us right now for a number of reasons, not the least of which is the fact that our clients have money, and they have access to the capital markets. That's a big difference between now and then," he explained.

While Roth said he doesn’t expect a repeat of 2008 playing out as a result of the current turmoil, “there is still this question of overhang.” But for now, he added, clients “really haven’t pulled back,” in their spending or project work for 2011.

By contrast, last week MDC Partners CEO Miles Nadal acknowledged a bit of client pullback in both spending and projects, but he stressed that most of it was in the form of delaying work until early 2012, not killing it outright.

When questioned about the tenuous economic situation in Europe, Roth responded that IPG wasn’t counting on Europe to help meet its numbers this year or next. He noted that 60% of the company’s revenue comes from North America, while 20% is derived from Europe and the remaining 20% comes from everywhere else.

Did he feel that the company’s decision a few years back to merge ad agencies Draft with FCB was correct in hindsight? “Absolutely. . . the behavior-based marketing [of Draft] coupled with the global creative footprint of FCB,” he said, has resulted in the merged entity continuing to be a top performer at the company. “The proof is in the results.”

As for the holding company overall, Roth noted: “We don’t have any big holes in terms of offerings” that require a huge acquisition. That said, the company will continue to set aside $150 million or so a year for so-called “bolt on” acquisitions, he noted, as it did recently for McCann in Australia and Brazil and for Draftfcb in the UK. 

Going forward, Roth said, two profit margin boosters will be offshore production facilities such as those built in Indonesia, Malaysia and Poland to handle many of the company’s digital production needs, and a continuing shift toward performance-based compensation models. The latter, he said, could be the “silver bullet” that brings the company’s profit margins “closer to where our industry used to be,” or well into double-digit territory as opposed to the current high single digits.  

“We're seeing roughly 50% of our media contracts have some form of performance-based compensation,” said Roth. “We haven't gotten yet to a pure model on performance-based compensation on traditional [creative] advertising,” he acknowledged.