Europe has shrunk, Asia Pacific is our second largest market: Interpublic CEO
New Delhi: Michael Roth, chairman and chief executive officer (CEO) of global advertising and marketing solutions company Interpublic Group (IPG), was in India along with the members of the board to showcase the India operations including agencies such as Lowe, McCann Erickson, Draftfcb, MRM and Weber Shandwick, among others. In an interview in New Delhi last week, he spoke on the company’s revenue growth in the Asia-Pacific region, the digital challenge and the impact of the proposed merger between two IPG rivals—Publicis Groupe SA and Omnicom Group Inc. Edited excerpts:
You visited India two years ago. How have things changed for the company since?
We have seen solid growth across our agencies in India. Asia Pacific in general is a very important market for us and it is growing. But in India, we made a couple of acquisitions and that is a good indication of our support to the opportunities in this market. One was Interactive Avenues (February 2013), which is a digital agency and the PR (public relations) firm Corporate Voice. We continue to invest here. We have seen 17% growth in 2013 in India. The organic growth was 6% because of the acquisitions, but the total revenue growth was 17%.
Is the traditional media business dying that you are so focused on digital?
One of the areas we explored by bringing our board of directors here was to see where the future marketplace would be. In the next few years, obviously, television continues to be an important component of the media outlet here in India. Print, unlike some other countries, continues to be very strong here. We do not see that declining. But we do see a rapid growth in digital and mobile and, therefore, you have seen our acquisitions help our offerings.
As India gets more broadband—3G and 4G (third and fourth generation)—mobile will continue to be a strong component of distribution. Just by population (size), India has one of the largest users of mobile and social media outlets. So it is an important area for us to focus on.
Was there a reason that you brought your board of directors to India?
It was to give them a sense of our strength in this marketplace, meet our individual agencies, provide support for them for the future, and also to get reassurance and comfort from some of these markets. We are actually No. 2 in the holding company presence in India, so it was a great place for the board to visit and see what was happening.
Two years ago, North America was contributing 60% revenue. Twenty percent came from Europe, and the rest of the world including Asia Pacific was 20%. Has the equation changed?
Yes, it has. Asia Pacific has become our second largest market in two years. We had a difficult year in Europe in 2013, which has shrunk, but Asia Pacific was very strong. In the last four years, Asia Pacific has grown by 42% while India has grown by 74%. A large part of this has come from organic growth.
There is a lot of buzz around the Indian elections. Does IPG work with governments or political parties globally?When we do work with them, we view political parties as a client. It’s not that we are taking positions or supporting that political party. Some of our agencies choose not to participate in political advertising. In the US, we do not represent any political party. Our tendency is not to do it. But if asked, we would entertain it.
In India, McCann is doing business with the Bhartiya Janta Party.
McCann does do some business, particularly on the creative side.
Have you seen the work?
No, I haven’t.
Some clients are going to them directly, but frankly we are agnostic where clients should spend their money. Facebook or Google have a bias to one outlet. No, we haven’t lost the race. Our role is different than theirs. We view them as an opportunity for us to partner with in meeting the needs of our clients in digital and social media space. Besides, they can’t provide the full-service integrated offering that we can provide.
With advertisers curbing media expenditure, hasn’t there been a squeeze on your margins?
Clients are spending more on digital and maybe less money on television, but the cost of doing that digital is more. The challenge is that less money goes into media cost and more money goes into production. Digital is labour intensive. We have to write a code and so on. So there is pressure on us to get more efficient. That is why you see the emergence of centralized, offshore production facilities that are lower cost so that we can get the quality of work that is necessary and get margins that we need in our business.
Right now, the impact of the proposed merger is confusion in terms of what the outcome is going to be. And, for us, that is an opportunity for recruiting as a lot of individuals are not clear what this transaction means. We have competitive scale in media and everything else. So we don’t feel threatened by the proposed merger. Whenever there is disruption, there is an opportunity to recruit and clients don’t like disruption.
The transaction is taking a little bit longer than expected. I don’t know why that is the case.
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