Revenue growth has been affected more at IPG than other global advertising groups by clients cutting or delaying advertising spend in an uncertain economic climate.
A group of the company's bigger technology and telecommunications clients have pulled back as they cut costs and lay off staff.
And a group of smaller clients are also cutting spend, resulting in a material change for IPG.
IPG reported a 1.7% drop in organic revenue to $US2.33 billion for the June quarter and pulled back its outlook for the rest of the year to 1% to 2% growth, down from previous guidance of 2%-4%.
This is a contrast to two major competitors. Omnicom reported organic revenue growing 3.4% and Publicis Groupe 7.1% in the June quarter.
WPP and Publicis numbers have not yet been released.
IPG chief executive Philippe Krakowsky called the result “inconsistent with our expectations” and the company's long-term track record of strong growth.
“The pressure on tech and telco is not abating,” Krakowsky told analysts in a briefing on June quarter numbers.
He says a “modestly” more uncertain economy is leading to delays and cuts in client advertising spend.
“And that … is impacting some of our businesses more than others,” he says.
“I think that the other thing about the uncertainty is in our long tail of smaller clients, we're seeing some small cost cuts. There's a degree to which that is adding up to something that is having an impact.
“I'd point out that our outlook for the year at this point is not contingent on a recovery in the rate of revenue change.”
Digital specialist agencies, such as Huge and R/GA, also continue to underperform.
“The transformation of those offerings continues to move forward,” he says. “And we've seen some good wins there recently. Restoring those brands to consistent growth is proving slower than anticipated.”
The impact on growth due to the telecom sector and digital specialists is about 3.5% in the June quarter.
However, he says IPG continues to grow in areas of the business that have been key drivers, including media offerings and the healthcare sector.
“We saw solid growth as well in disciplines such as public relations, and our experiential offerings,” he says
He says “very strong new business momentum” encompasses a diverse set of client industries, including pharma, financial services, autos, and food and beverage.
“These winds span the full range of marketing disciplines, especially in media, as well as global integrated solutions that bring together creative public relations experiential and data.
“As such, they underscore the role that we play as a critical partner of the world's most sophisticated and demanding marketers.
“To cite an important example, we're proud to have recently significantly expanded our relationship with Pfizer, having been named their lead global creative public relations and medical affairs partner.
“Most of their new revenue from our wins has yet to ramp given the transition periods between announcement and onboarding.
“As these winds come on stream in greater magnitude during the second half of the year, we expect their impact to be evident in our results.”
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