NEW YORK Is Interpublic Group preparing to restructure its global media operations again? The holding company has done so twice in the last two years and IPG insiders don't rule out another possible reshuffling, but said it wouldn't happen (if at all) until the second half of 2008.
Last week IPG CEO Michael Roth issued an internal memo saying the company needed to find ways to operate more efficiently across its businesses. As part of that effort, he said, a task force had been formed to examine the global operations of IPG's two big media agency networks, Initiative and Universal McCann. Nick Brien, worldwide CEO at UM, is leading the task force.
When asked today about speculation regarding another possible reorganization of its media units, Roth said it was not the case—UM will remain aligned with McCann and Initiative will remain aligned with DraftFCB. "We like the results we have achieved" under that structure, put in place a little more than a year ago, he said today at the 35th annual UBS Global Media Conference here. He did confirm that Brien is leading a media task force examining operating efficiencies.
Last week, the industry was abuzz with rumors that IPG was in fact taking another stab at organizing Initiative and UM under one management roof with Brien at the helm.
But IPG quickly pronounced the rumors untrue, underscoring the fact that while Brien heads UM and the task force, Initiative remains under the leadership of worldwide CEO Alec Gerster, and will continue to remain under Gerster's direction.
In a statement issued last Friday, Roth said, "We remain committed to the media model we announced a year ago which is predicated on continuing to develop Initiative and UM as strong, independent, global brands that partner with our major global network. It is therefore business as usual at our media agencies when it comes to the services they provide to their clients, as well as the leadership teams of both media agencies, which remain as is." He made similar remarks at the UBS conference today.
But some analysts question IPG's strategy, arguing that the media holding company structure is logical, particularly in today's fragmented and complex media world. "I never fully understood IPG's decision to put [media] back within the [creative] agencies," said Bear Stearns advertising analyst Alexia Quadrani. "It definitely goes against the grain of what the rest of the industry is doing. And I feel that the rest of the industry makes a lot of sense."
If Brien's task force succeeds in defining and implementing substantial cost-saving ways of doing business, a new model might be adopted, company insiders said.
Competitors also took IPG's formation of its task force as a sign that the company would once again adopt the media model embraced by all the other holding companies in which separate media brands are overseen by common management arms. After all, those competitors said, their media management arms spend much of their time identifying and implementing the same kinds of efficiencies that IPG seeks through its media task force.
It wasn't that long ago that IPG embraced the media holding company model. In 2005, it hired former MTV president Mark Rosenthal as CEO of IPG Media, then a new unit overseeing Initiative and Universal McCann. The revamp came after a couple of tough years for IPG media operations, which culminated with the 2005 departure of the General Motors $3.2 billion buying account, which went to Publicis Groupe's Planworks. That same year UM lost Lowe's ($315 million) and Initiative lost Bank of America ($250 million).
IPG Media was similar to the model that all of the other major holding companies put in place and remain committed to. The Publicis-owned media shops (Starcom, MediaVest, Zenith and Optimedia), for example, operate under the Publicis Groupe Media banner, overseen by CEO Jack Klues. Daryl Simm is CEO of Omnicom Media Group, which oversees both OMD and PHD. Irwin Gotlieb runs GroupM as worldwide CEO, with MindShare, Mediaedge:cia, MediaCom and Maxxus reporting into it.
In October of last year, however, IPG blew up the Rosenthal-led unit, aligning Initiative with DraftFCB and realigning UM with McCann Worldgroup. Both Initiative and UM kept separate P&Ls, however, with their respective CEOs, Gerster and Brien, reporting to Roth.
Sources inside IPG strongly denied that Roth's use of the term "efficiencies" was intended to signal that a possible round of layoffs could occur as result of the task force's work.
That said, sources familiar with the situation said the task force might conclude that in certain markets, where Initiative and UM operate separately, it might make sense to combine back-office operations, real estate, or even share certain managers while keeping the client-service teams completely separate and unaffected. In some "limited number of markets," said Roth, management functions might be consolidated
Another example where efficiencies could be realized: joint negotiation of third-party vendor contracts, such as research and ratings services. Any savings derived from the moves would be reinvested in the media shops, said Roth.
While Roth insists that for now the company's media model won't change, he wrote in his memo that the new initiative does "require a single internal driver. With the active agreement of both the media networks, as well as Interpublic's support, Nick Brien has been charged with that responsibility. You will therefore be hearing from him as he builds a cross-agency task force to further accelerate our media strategy. Please provide him with the information he requests and participate in any other way that he asks."
The Roth memo also suggested that similar groups would be formed to scrutinize other units of the holding company. Executives in other IPG disciplines will also soon be asked to spearhead efforts similar to Brien's, sources said.