PUBGY Publicis Groupe SA (QX)

By Nat Ives 

Interpublic Group of Cos. said marketers in health care, consumer goods and financial services drove first-quarter growth, even as rival advertising companies made big moves that will only heighten competition.

"That is where the action is right now," Chief Executive Michael Roth said of health care during a conference call.

IPG, which owns agency networks including McCann Worldgroup, MullenLowe Group and IPG Mediabrands, reported a 6.4% increase in first-quarter organic net revenue -- a metric that strips out currency effects and acquisitions.

The ad-agency holding company is trying to navigate rapid changes in its industry. The demand for data-driven marketing is surging, for example, while large consultancy firms are continuing to encroach on the sector.

Early this month, Accenture PLC agreed to buy the prominent independent ad agency Droga5. And last week, French ad giant Publicis Groupe SA struck a deal to buy Alliance Data Systems Corp.'s Epsilon marketing-services business for $4.4 billion.

IPG itself bought Acxiom Corp.'s Marketing Solutions, which specializes in housing and managing consumer data, for $2.3 billion last fall.

Asked about rivals' recent acquisitions, Mr. Roth said IPG benefited from buying a company that it already knew well. "We chose the asset that we felt best provided us from a cultural fit as well as the capabilities that we see that we need," he said.

That is helping IPG integrate Acxiom -- a process that's often difficult in the ad business, Mr. Roth said. The company started by linking Acxiom with its media agencies, and will proceed to creative functions next, he said.

A large consulting firm may struggle more than a specialized advertising holding company to make the most of a newly acquired advertising business, he suggested. "They make our silos look like a cakewalk," he said. "The ability for an Accenture to integrate Droga is going to be interesting to watch," he said.

But Mr. Roth acknowledged the challenge presented by consulting firms, saying they sometimes win marketing business by virtue of their existing consulting relationships with clients. "It is those pitches that we don't really get to see," he said.

IPG is trying to counter that by developing consulting practices at agencies such as R/GA and Huge.

Mr. Roth credited IPG's depth of medical expertise for its continued strength in health care marketing. When competing for a new health-care assignment, he said, "we can actually pick the right agency by disease."

But the category also has a robust pipeline of new drugs to market, Mr. Roth added. "I remember when health care was not growing double digits, when a lot of products were coming off-patent," he said.

Organic net revenue rose 5.7% in the U.S. and 7.7% internationally, IPG said. Total first-quarter revenue of $2.4 billion was up 8.9% from the period a year prior. The company reported a net loss of $9.5 million, compared with a net loss of $16.1 million a year earlier.

It reaffirmed its earlier target of organic revenue growth of 2% to 3% in 2019, despite the loss last year of two big clients, the U.S. Army and Fiat Chrysler Automobiles NV, Mr. Roth said. Client losses from the second half of 2018 won't impact results until the second half of this year, he said.

(END) Dow Jones Newswires

April 26, 2019 12:18 ET (16:18 GMT)

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