IPG sees a level of uncertainty creeping back into conversations with clients.
The global advertising group just posted "moderate" organic revenue growth of 1.7% for the June quarter. Net revenue was flat at $US2.33 billion.
The company now forecasts full year organic revenue growth of 1%, lowering its estimate from 1% to 2%.
The technology and telecoms sector, plus digital specialist accounts, are dragging on IPG’s revenue, slicing about 1.7% organic growth from results in the June quarter.
Part of that was the loss of a major telco client.
“Some recovery in tech would clearly be wind in our sails,” CEO Philippe Krakowsky told analysts during a briefing.
Growth at IPG was driven by health care, IPG Mediabrands, food and beverage and consumer goods.
Retail was flat and IPG also saw decreases in financial services, auto and transportation.
Nevertheless, IPG described the three months to June as “solid”.
“The operating environment has become more challenging,” Krakowsky told analysts.
He sees a level of uncertainty across the world, geopolitically, and in domestic US fiscal policy is stuck in neutral.
“It feels like there's a measure of uncertainty that has worked its way back into conversations since three months ago,” he said.
“And so when we say approximately 1% (outlook), that feels to us like there's still some ranginess to that but it's only the middle of the year. We're telling you that it's moved from 1% to 2% to closer to 1%.”
Conversations with clients have moved on from a year ago when there was a pervasive, almost universal, feeling that there was a recession right around the corner, he said.
“There is a bit more caution and the way we see it is decisions on reviews, decisions on client spend, either taking a bit longer to be made or delayed with a little bit of a … we'll get back to it,” Krakowsky said.
“And that's in certain areas of the business or at some marketers, it's not across the board.
“But to the extent that it's begun to be something that we're factoring into our thinking, we felt that it needed to be called out."
Krakowsky told analysts of strong performances from creative studio Deutsch LA, public relations Golin and data unit Acxiom (data).
“Also in keeping with recent quarters, underperformance at our digital specialty agencies weighed on our consolidated growth. That drag was about 1% of organic growth in the second quarter," he said.
“The common thread in the growth of our two largest businesses, IPG Mediabrands and IPG Health, which are also our most successful, has to do with the specialised high-value services that they provide to marketers.
“These rely on skill sets that are more technical, reach audiences with greater precision and lead directly to outcomes that we can assess and optimise.
“These include audience segmentation work, predictive analytics and data-driven decisioning, much of it powered by Acxiom and all of which has been built by in-house engineering talent creating technology solutions that rely on machine learning algorithms and more recently, newer AI capabilities.
“The developments we're seeing in Generative AI will be equally fundamental to the transformation of a broader set of our offerings.
“Collaborations with Adobe, Amazon, Blackbird.AI, Getty Images, Google, Microsoft and others have given us secure enterprise access to advanced AI tools and large language models which are increasingly informing every area of our business, including insight generation, creative ideation in production and work in our earn and experiential communications practices, as well as further enhancing our media and precision marketing capabilities.
“Over the past 12 months, our progress with these emerging technologies has been significant.
“The ongoing upskilling of our people has been central to this process. We see this as a strategic imperative and have made it the responsibility of every operating leadership team across the company.
“Generative AI produces foundational capabilities and new canvases for us to work more expansively with our clients.
“Over time, this offers the promise of reigniting many of our creative offerings as engines of value creation.
“We recently became the first company to unite all facets of the content supply chain by integrating Adobe's GenStudio AI product into our marketing technology platform, the IPG engine.”
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