He didn’t use the words conflict of interest in response to a question about the practice of holding companies and their agencies buying up and reselling inventory, particularly in the programmatic buying sphere.
Rather, Interpublic CEO Michael Roth said the company isn’t a re-seller in the programmatic space because it is “inconsistent with our model” of advising clients on the best way to allocate their spending budgets across different media channels. Helping clients allocate their budgets is a key part of all the holding company offerings. Roth’s implication: It’s hard to be “agnostic” about such advice when you have skin in the game. In other words, it's a conflict.
Roth didn’t cite by name competitors that are in the inventory resale business but WPP and Omnicom have acknowledged engaging in the practice with the blessing of clients.
The fact that some clients are taking programmatic in house, Roth added—in response to a question he was asked on the company’s Friday conference call to discuss earnings with analysts—is because “they don’t trust the pricing” process of holding companies that do it because that process is not fully transparent.
“Our clients view us as partners,” and advisors, Roth said, adding, “There is no risk of us selling them” inventory.
Roth also said he didn’t believe the profit margin on the resale of inventory was significantly higher than other agency/holding company offerings and are likely to shrink over time.
The one exception, said Roth, is the company’s corporate trading practice, Orion, where re-selling purchased inventory is the accepted norm throughout the industry.
There was little discussion on the analyst call of the recent changes to the company’s board of directors –changes that came in consultation with activist investor Elliott Management, which had threatened a proxy fight at this year’s annual meeting. As a result of the board changes, and the creation of a new Finance Committee that will focus on steps to improve profit margins, Elliott agreed to put off any potential proxy battle for a year.
Roth did say he thought the new board members were “very capable.” He added that while the new Finance Committee is not dissimilar from the firm’s audit committee, that additional focus on improving margins was welcome.
Separately, Roth characterized IPG’s latest earnings results as “strong for both the fourth quarter and full year… I believe it’s fair to say that the quality of our offerings is at its highest level in at least a decade.”
Among the company’s financial highlights, organic revenue growth was 4.8% in the quarter, 5.5% for the full year.
By comparison, Omnicom -- reporting earlier this week -- said it posted 5.7% organic growth for the full year and 5.9% for the fourth quarter. And Publicis, reporting Thursday, said it had 2% growth for the full year and 3.2% Q4 organic growth. Havas meanwhile, also reporting Thursday said its organic growth for the year reached 5.1% while fourth quarter growth was 3.5%.