Credit: Michal Pech via Unsplash
Changes are ahead for IPG, the US-based global advertising group, moving away from an asset mix with limited growth rates to one that “one might find in some of our competitors” including new media buying models.
IPG, looking to close 2024 as strong as possible, still expects organic revenue growth for the 12 months at just 1%.
“We have clear line of sight to the structural and market-facing changes that we need to make to improve our growth profile,” CEO Philippe Krakowsky told analysts in a briefing.
“In media, an area we have always excelled, the recent shift in trading terms that have seen many clients accept and even embrace principal buying has clearly impacted our business.”
In the September quarter, performance was mixed with six of eight client sectors showing growth, led by food and beverage.
Healthcare, retail and financial service sectors also grew but auto and transport fell, as did tech and telecom due to account losses in 2023.
Krakowsky said improving operational structure and profitability will mean better leveraging platform services, further refining ways of working and making more effective use of near and offshoring.
“We're also assessing structural actions, such as moving to unified back-office and leadership teams in many international markets as well as our use of real estate to both improve collaboration and eliminate unnecessary costs,” he said.
Krakowsky said IPG is investing in the stronger growth areas of the business and at the same time, moving rapidly to address underperforming ones.
Part of that is IPG Interact which has unified data, engineering, martech and adtech resources under one leadership team.
The framework integrates data across the campaign life cycle from brand research, as well as audience insights and audience creation, all the way through to creative ideation, production, commerce and personalised CRM programs.
It also powers media activation and optimisation, including earned and owned channels.
“Interact delivers connectivity across our agencies and global reach,” he said.
“It connects the entire portfolio so that our agencies can drive better marketing results across media channels and touch points for our clients all in real time. This includes our unified retail media network solution, which is particularly relevant as marketers increasingly look to make informed investment decisions in this very dynamic space.
Krakowsky said data expertise and technology tools have been core to media offerings for some time with the performance of Mediabrands.
“That said, as of a bit over a year ago, we are clearly operating in a competitive environment where macro uncertainty and other economic factors put a much greater premium on cost and efficiency," he said. "Given that marketplace evolution, we continue to scale our practice in Principal Media Mining.”
With principal media, agencies buy inventory directly from media owners, seeking a discount for a bulk order, then resell to clients at a margin.
“This represents an incremental option for value creation for prospective clients, which has been a decisive factor in some large pitches,” he said.
“It's also an area of opportunity for growth with our existing client base. Worth noting that when we all talk about ‘principal media,’ there's actually a broad range of activity, whether that's deal types, types of products that are available under this umbrella in order to generate volume-based value for marketers.
“Our principal buying solution is purpose-built for the current media ecosystem, meaning that it's an offering that includes the full range of inventory options that includes connected TV, social search ads, retail, media and other digital media formats. We put in place the necessary guardrails to exclude low-quality inventory.
“And it's a bit like the skinny bundle approach taken by certain media owners to get consumers all of the content they need with advantageous pricing.”
Skinny bundles refer to new streaming services which offer limited channels rather than the hundreds, most people never watch, offered by major platforms.
“This strategic approach gives us the ability to drive value for clients, while also ensuring we can meet the needs of marketers who operate in highly regulated industries and those that place a higher value on brand safety,” he said.
“Since launching this incremental dimension or practice area, within the media offering, there's been strong interests from existing and prospective clients.
“We've seen some early wins in new business, and many of our clients have already opted in -- fully opted in to this new trading model going forward as of the new year. As we build scale, we'll also be well positioned to incorporate data and tech components into the value propositions that we placed before marketers.”
He said principal media is a lever that not only impacts performance and competitive reviews, but will also offers existing clients a range of new products, and an opportunity for organic growth.
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