Why Interpublic Is Floundering While MDC Tops Ad-Agency Growth Charts

MDC Partners (MDCA) will have the best organic revenue growth record of all ad agencies in 2009 and 2010, according to Deutsche Bank analyst Matthew Chesler. Its giant rival Interpublic (IPG) will have the worst. While all public ad-agency holding companies saw revenues decline for 2009, MDC's fell the least, just 5.5 percent. IPG likely declined 11.8 percent:
  • Company, 2009, 2010
  • MDC Partners -5.5%, 3.2%
  • Publicis -6.5%, 0.5%
  • Havas -7.9%. 0.5%
  • WPP -8.1%, 0.7%
  • Omnicom -8.7%, 0.5%
  • Aegis -9.2%, 2.0%
  • Interpublic -11.8%, -1.4%
  • Average -8.6%, 0.2% Ranked by 2009 organic growth estimates
The positions of MDC and Interpublic aren't too surprising: MDC is the smallest of the seven companies and is thus growing from a smaller base.

Interpublic, meanwhile, halted major acquisitions in 2004 following an accounting scandal that required it to reimburse many of its clients. (That's still being worked through IPG's books, according to page 13 of this SEC disclosure. IPG paid $121 million back to ripped-off clients in the first nine months of 2009; it paid $126 million in 2008.) That forms a drag on IPG's ability to buy hot new shops -- which shows up in its lackluster growth rate.

Internally, the company is struggling to merge Deutsch and Lowe Worldwide into something called "Deutsch Inc., a Lowe & Partners Company." (Although it's interesting that Deutsch doesn't refer to itself that way.)

How is the merger going? Not well. Deutsch's Ikea account went into review and the agency just bailed on the pitch. Were the merger and the loss linked? Can't say for sure. But one can't have been anything other than a distraction from the other.