Michael Roth, the Interpublic Group CEO. said that clients are keeping cutbacks to ad spending commitments at a minimum, despite continuing worries about the macroeconomic picture.
Roth, speaking at the UBS Global Media and Communications Conference in New York, said the amount of project work that has been pulled in the U.S. remains "under 4%," or a very minimal amount in his view.
In Europe, however, clients have pulled back more, although Roth didn't indicate how much more. But he stressed those pullbacks were anticipated, given the ongoing economic woes in the region, and that they were factored into the company's assumptions about 2011 performance.
"We weren't counting on a big recovery in Europe," he said.
Roth also said the company was on course to achieve its stated goal of reaching a 13% profit margin by 2014 and that a major driver toward achievement is performance-based compensation. He indicated that currently, 50% of the holding company's media-services contracts have some element of performance-based compensation; that percentage would continue to grow.
New business helps grow margins as well, and IPG, Roth confirmed. is in the biggest review of the year: General Motors’ global $3 billion media agency review. A win would give it one of the biggest media portfolios of auto clients among holding companies, as it already handles Chrysler, Hyundai/Kia and BMW.
It’s also in the hunt for the Chevrolet creative business now in review, he confirmed. Hitting the margin target also assumes that the company will maintain organic growth levels of at least 4% to 5%, which it is on track to exceed this year. For the first nine months of 2011, IPG reported organic growth of 7.5%, highest among its core group of competitors. The comparable figure for the others: Publicis (6.9%); Omnicom (6.5%); Havas (6.1%); and WPP (5.6%).
Roth also confirmed that managers of individual units at the company are compensated based on margin targets, and that it’s up to them to devise strategies for achieving those targets. He noted the company is strengthening its position overseas, as both investors and analysts have focused on its “overexposure” in the U.S. Organic growth outside the U.S. has grown to 20% from 14% from just a few years ago. He also said the company intends to double its size in China in the next five years.
In response to a question, Roth said he did not believe that the major digital companies like Google and Facebook were looking to--or could for that matter--muscle in on the agency business. The reason, he said, is that by definition those companies would be "biased" in pushing their own media on clients. "We do it agnostically," he said. He added that agencies are also better prepared to offer clients "big ideas" within the strategic marketing space.