Last Updated Apr 15, 2010 12:43 PM EDT
- HAV 2.6%
- WPP 2.5%
- OMC 2.3%
- PUB 2.0%
- IPG -0.2%
One thing media investors have learned is that agency revenue is recovering faster than expected. Our agency contacts privately confirm the good start to the year, as do public comments by senior execs from the European groupsSo what's wrong with IPG? One word: McCann:
Were it not for the Verizon Wireless loss in early 2Q, IPG would be roughly flat. The Wireless business was shifted out of McCann (to Dentsu's McGarryBowen) despite reportedly good results and now the shop must defend the $300m Fios account. Although we acknowledge the importance of these assignments to McCann (key unit for IPG's turnaround) we believe the situation is far from "devastating" as characterized by the trade press. The business in question is ~10-20% of the whole Verizon relationship, with other IPG agencies such as MRM, R/GA and Hill Holiday continuing to do significant work for the client - in some cases growing - which could partially cushion the negative impact.That's actually good news for McCann and IPG, as it suggests that the worst-case scenario (the gradual exit of all $1.5 billion in billings from IPG) is less likely than the best-case scenario (a massive impact on McCann, but everyone else carries on as usual).
Interestingly, in Chesler's discussion of recent IPG account wins, McCann's only "victory" was the retention of the InterContinental Hotels/Holiday Inn business. Fine -- but retaining business is not the same as winning business. All the other wins Chesler mentions went to other agencies in IPG, such as DraftFCB, MRM Worldwide, and The Martin Agency. Also a problem is Deutsch/Lowe's loss of Novartis's Prevacid business ($200 million in billings), Ikea ($90 million), and Johnson & Johnson's Tylenol and Motrin accounts ($170 million).
Having followed Deutsch since the days when it was a small shop, I'm astonished that I'm typing the agency's name next to the word "problem." This shop needs to rediscover its 1990s cojones -- a task that would have been well within its reach had it not been saddled with the problem of integrating the failed Lowe Worldwide network.
Regardless, Chesler predicts good news for everyone -- he even expects IPG shares, currently trading at $9.05, to hit $10.
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