IPG said Wednesday that CEO Michael Roth will step down at the end of the year. He will be succeeded by IPG EVP and COO Philippe Krakowsky effective Jan. 1.
IPG also reported earnings for Q3 with a revenue decrease of 5.2% year over year to $1.95 billion due to the ongoing pandemic.
Krakowsky, an 18-year IPG exec, has been the favored candidate to succeed Roth since he was elevated to COO last year. Prior to that he was CEO of IPG’s media group Mediabrands and has overseen communications, talent, business development and strategy functions. He will remain chief strategy officer at IPG.
“Philippe is the right CEO for the next era at IPG,” Roth said in a statement. “He is a brilliant strategist and effective leader who has played a key role in developing our open architecture client service model, as well as modernizing our data, marketing services and media solutions. Our partnership over the years has been a key factor in our long-term success with both clients and our people.”
Roth has been executive chairman and CEO of IPG since 2004, when he was brought in from the financial world to turn around the struggling holding company after an accounting scandal. He restructured the group and created its open architecture model, which incentivizes agencies to collaborate.
“Michael’s leadership of IPG has been and continues to be outstanding. He has substantially transformed the company and ushered in a new era of modern marketing solutions,” said David Thomas, presiding director of the IPG Board of Directors in a statement.
IPG has been the strongest performer of the big six agency groups in recent years, including during the pandemic, and the Q3 organic revenue decline of 5.2% was better than Publicis Groupe at 5.6% and Havas at 10.4%, the other two groups to report so far for this quarter.
Roth, a former tax lawyer, was originally a non-executive director of IPG and the company appointed him as CEO helped to stabilise the company’s finances and debt during a torrid period.
In a 2017 interview with Campaign, Roth said: “What keeps me going is I love what I do… I love the people and the organisation. Where else can you get to have a career that is global in nature, that has 50,000 employees under your responsibility, with the best talent in the world? And we’re performing well. Why wouldn’t anyone want to do that [job]?”
The news of Krakowsky’s appointment came a week after longtime McCann Worldgroup CEO Harris Diamond said he would step down effective Jan 1. He was once seen as a possible successor to Roth until Krakowsky emerged as the favorite.
IPG continued to outperform the sector in Q3 with results that came in stronger than Q2.
Organic net revenue declines of 3.7% “continues to show the effect of the pandemic and global economic contraction, though perhaps not to the extent anticipated,” Roth said on the company earnings call Wednesday.
While IPG’s events businesses, which made up 5% of revenue last year, continue to struggle, its media, data and technology and healthcare practices all grew in the quarter. Creative agency performance varied due to client mixes in different regions.
IPG’s integrated agency network business, which includes its creative, media, technology and digital offerings, declined 1.4% organically in the quarter, while its marketing services segment, which includes events, dropped 16.5%.
Organic revenue in the U.S., which made up 65% of IPG’s revenue mix in the quarter, declined 2.4%. The U.K. was down 10.3%, and APAC was IPG’s worst performing region, down 15.2%. Internationally, IPG organic revenue declined 6% overall.
As clients continue to grapple with the pandemic, IPG saw growth from the retail and healthcare sectors, while spending from food and beverage and tech and telecom clients declined in the quarter.
“The tone of the business was clearly better than last quarter,” Roth said. “So much of this is both regional and client specific.”
IPG will continue a restructure into Q4 to mitigate the impacts of the pandemic. A majority of activity in Q3 centered on reducing the group’s real estate footprint by 500,000 square feet. IPG projects that these and further actions in Q4 will result in $100 million to $130 million in total savings.
“Agencies are rethinking their footprints and what’s necessary,” Roth said. “The workplace environment is going to be different and we’re trying to take whatever structural changes we need to take now so when 2021 comes along, we’re really well positioned.”
IPG also recently said it would sustain salary cuts for its executives for the remainder of the year, even as competitors including Publicis and WPP have ended exec pay cuts. Salary-related expenses decreased 4.8% to $1.27 billion in Q3.
As IPG heads into its largest quarter, uncertainties regarding client spend around the holiday shopping season remain. Roth acknowledged it’s likely that improvement in the agency sector “will not be linear by quarter” based on the rocky trajectory of the pandemic.
“COVID, as we are all painfully aware, remains a threat to everyday life and, regrettably, is picking up in many key global markets,” Roth said on the call. “All of this makes client decision-making for the holiday season difficult to forecast.”
Under Krakowsky’s leadership, IPG will lean into its investments in data and technology through Acxiom, Kinesso and Matterkind, which he sees as potential new revenue streams for the group through platform or IP licensing.
But IPG does not anticipate any major acquisitions to fill gaps in its portfolio in the near future.
“When we look at our wishlist now, we don’t see any transactions that are necessary for us to compete,” Roth said.