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Do not feel any threat to IPG's No. 2 rank in India: Michael Roth

Michael Roth, Chairman and CEO of Interpublic Group, the world's fourth-largest advertising and marketing solutions company, spoke to BUSINESS TODAY about why his group is a lean organisation and ready for growth.

Shamni Pande        Last Updated: May 20, 2014  | 11:17 IST
Interpublic Group Chairman and CEO Michael Roth
Interpublic Group Chairman and CEO Michael Roth (Photo: Shekhar Ghosh)

Michael Roth, Chairman and CEO of Interpublic Group (IPG), the world's fourth-largest advertising and marketing solutions company, was in India recently. He and his India team showcased the group's scale of operations and investments to IPG's global board meet. He spoke to BUSINESS TODAY about why his group is a lean organisation and ready for growth. Edited excerpts of the interview:

Q. What makes you zero in on India?

A. It is an important market for us. We are the No.2 holding company in India, we made three acquisitions in 2013 and obviously we expect to continue to invest in India. So it was important to showcase the Indian market to our board and show the width of talent here.

Our largest acquisition in 2013 was Interactive Avenues, a digital agency. The second was in PR - Corporate Voice - and the third was of End-to-End Marketing by McCann. Digital, however, will continue to be a growth market, and we will look at it aggressively. But the main growth will be organic for us here. We have a very strong client base, both multinational as well as local.

Q. How confident are you about maintaining your position as the second largest holding company in India?

A. Our history in India goes way back. For instance, Lowe's relationship with Unilever goes back 75 years. So, we continue to perform well in this market, we have the necessary scale... in all three of our global networks and in our media offering.

To answer your question directly, no, I do not feel any threat to my No. 2 rank here. But my position is that you don't have to be No. 1. What you want to be is competitive, servicing clients, winning new business and growing your client base. It does not matter what size you are, as long as you're performing. We have enough scale in all our networks to be competitive.

We compete against WPP [globally], so if the merger between Omnicom and Publicis were to happen, I view it as a potential disruptive force for both of them - therefore, an opportunity for us, both on the recruiting side and the client side.

Q. Why do you say that?

A. WPP is always a disruptive force [laughs]. There will, of course, be the whole process of the merger, but there will also be conflict issues to deal with. But, of course, we have not seen it come to fruition.

Q. Your group has had to deal with a bad 2012 and 2013 in terms of revenue and growth.

A. Our growth for 2013 was 2.8 per cent, which was the high end of our plan. So, we did well in terms of organic growth. Where we missed, in 2013, was margin expansion - the primary driver of that was the problems we were having in Continental Europe - was down six per cent. We had originally figured that it would be flat to slightly down. So, to overcome that kind of pressure, we repositioned our offerings at the end of the year, and took a $61 million restructuring charge. So we go into 2014, where we have right-sized our expense profile against our underperforming markets.
 
We expect to see a benefit this year of $40 million from those actions, so we believe that we should grow our revenue three to four per cent in 2014, and expand margins by at least 100 basis points. The tone of our business is solid and we are well-positioned to deliver on expectations.

Q. The media landscape has changed dramatically. How do you expect to deal with 'frenemies' such as Google?

A. Our role is to be an agnostic consultant to clients in terms of where they should spend their media and advertising dollars. Google and Facebook are offerings where money can be spent. We tell our clients, why, where, how much and how. So Google is part of that opportunity for our clients. It also provides us with analytics in terms of the effectiveness of where we put those dollars. In some cases, Google and Facebook will work directly with our clients, and that is when the issue comes out. There, our view is: if our clients are working with Facebook directly, they are not being agnostic in terms of where the money has to be put. It might be effective, but you could perhaps be more effective with that money spent elsewhere and you lose that when you deal directly with either of them. We prefer to partner with them.

Q. You are not present in market research, while many in the communication industry straddle it.

A. Market research is rentable. We don't have to own it. I know one of our competitors feels they have to own it, but there is plenty of data around. We have 60-70 data source points for our research and it is constantly changing. So rather than own it, we rent it and get specific information we are looking for in markets we want to be in, and as new resources come up, we are free to use them. Our business model supports that kind of flexibility. We have created consortiums with media owners, on the media side, to provide the insights and in the programmable buying side of our business. We do not want to be wedded to one source.

Q. So where are you in the global pecking order, in terms of size?

A. If you consider revenue, we are No. 4. And the difference between us and the next competitor is pretty significant. We are over $7 billion in revenue terms, so we don't lack scale in any market we compete in. We still place $37 billion media, so scale is not an issue for us.

Q. How much does India contribute to your revenue?

A. We do not give out specific numbers. India is part of the Asia-Pacific region, which is our second largest market, and it represents 12 per cent of our revenue.

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