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IPG ‘reinvents’ Huge and R/GA following lagging client demand

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By Sam Bradley, Journalist

February 9, 2023 | 4 min read

US holding company expects to overhaul R/GA and Huge business models this year, following ‘soft‘ business performance in 2022.

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IPG revealed the plans in an annual earnings call with analysts / The Drum

American holding group Interpublic Group expects to see its ad agencies buffeted by “modest headwinds” this year, said chief executive officer Philippe Krakowsky.

The IPG boss told analysts that “uncertain” economic conditions and falling demand among tech clients have particularly affected its flagship digital agencies R/GA and Huge.

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Ellen Johnson, executive vice-president and chief financial officer, said that both agencies “had soft performance, which weighed significantly on the overall segment growth.”

Krakowsky said that “they’re premium providers and largely project-based businesses,” and although client demand for project-based work was “very solid” at a group level, demand for digital work – R/GA and Huge’s specialty – was “weak.” He also suggested “client attrition” among tech clients was partly to blame.

Both companies are midway through an overhaul of their business models, a development signaled back in October. Krakowksy said that “every three to five years, these agencies need to reinvent and reconfigure because they are at the leading edge,” and suggested that future business models for each company would see them tied closer to the wider Interpublic agency portfolio.

“Tying them more into Open Architecture [IPG’s integrated agency framework] or our data stack is clearly something we need to focus on. A measure of independence is something that is going to need to be addressed,” he said.

R/GA made 18 redundancies in New York last year when demand for projects began to fall; later in 2023, its New York office was downsized, as part of a wider Interpublic effort to cut real estate costs by $20m a year. Last year, the holding company reduced its office footprint by 6.7%.

While Johnson said that R/GA’s performance might not pick up until “the back half of this year,” Krakowksy revealed that Huge is set to unveil its new business model and client proposition by the end of the first quarter of 2023.

Overall, IPG reported $9.5bn in net revenue for 2022 and increased its EBITA (earnings before interest, tax and amortization) margin to 16.6%. But in the face of “uncertain macro” economic conditions, Krakowsky said that he expects that margin to increase just 0.1%, with a predicted organic net revenue growth of 2-4%, significantly less than last year’s 7%.

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