IPG, Havas Post Contrasting Results Illustrating Mixed Trends For Agencies in 3Q23

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Interpublic reported 3Q23 results on Friday featuring more of the same of what we saw during the second quarter of the year – if weaker than the company appeared to expect –  falling by 0.4% year-over-year organically.  With expectations for the fourth quarter of only 1% growth, full year guidance was effectively reduced from a range of 1-2% as of last quarter to 0% now.  Tech and telecom clients were cited as continuing to present a drag on results, -3.2%, to be specific, according to the company.

Mediabrands continued to expand (with “very strong global growth”, consistent with trends observable at most of their peer business units at competitors), while digital specialty agencies (Huge, R/GA and MRM) were described as having “challenged” results.  Similarly, the company’s segment featuring creative agencies McCann Worldwide and FCB was also down, falling by 4.1%, and reflecting a broader trend of weakness among those types of businesses despite the potential for outsized impact on clients (towards those ends, comments on FCB implied growth for that business).  Meanwhile, the segment capturing the company’s PR and event agencies fared very well, growing by 6.5% organically

Comments from the company regarding certain type of opportunities not converting into actual work in a manner that they are used to seeing appears to be reflective of broader geopolitical concerns, risk aversion and heightened uncertainty among global marketers that was present even before the Israel-Hamas war.   Short-term-focused decision-making appears likely to persist for the near-term across the industry.

In response to a question about IPG assessing “internal structural solutions to improve growth” the company’s CEO Philippe Krakowsky reflected on how the digital specialty agencies would, historically, go “through cycles of transformation every four or five years” but then noted that the current environment has proven to be a difficult one for them to “reboot or reinvest” in, especially given the extended duration of cuts that they have experienced from technology-focused clients.  Although no specifics were provided, Krakowsky said “we clearly have to ramp up the urgency on this front and be open to a broader range of solutions” and that they may look for a “coordinated approach to…go to market…benefit(ing) from scale…(and) making it simpler for clients to engage.”

Geographically, the US was down -1.2% while the UK was up 2.2%.  Continental Europe continued to be particularly soft with a -3.9% decline.  In total, Europe was down -0.7%, similar to trends for the year’s other quarters.   APAC was down by more at -5.0%, but Latin America was a bright spot – as it has been for other agency groups recently – growing 5.7%.

Meanwhile, Vivendi’s Havas also produced third quarter results in the last 24 hours and fared much better.   Organic growth across the company was 4.3%, including 2.7% in North America, 2.2% in Europe, 4.5% in APAC and Africa and a remarkable 36.2% in Latin America.   As it was for IPG, the region has been a standout globally for others, too: Publicis posted 6.9% organic growth there, while Omnicom grew 19.2%.

Trends we have seen from Havas this year are more in line with those from Publicis and Omnicom, while those from Interpublic have trended closer to what we have seen from WPP and Dentsu, as the largest holding companies have generally produced mixed results this year.