Media: All About ... Interpublic Group's media woes

With recent big losses, IPG must rebuild its media, Alasdair Reid writes.

Interpublic has problems with its media operations and has tasked senior management, including the McCann Erickson chairman and chief executive, John Dooner, to find a solution. This is a response to recent events, primarily Initiative's loss of Unilever, its oldest and most eminent client in the UK and Western Europe.

This was a trauma that Initiative's counterparts at Universal McCann can sympathise with, given its recent loss of Nestle. IPG now has the chance to redesign its group media offering from the ground upwards. It is time, sources say, to start playing catch-up with Omnicom, WPP and Publicis.

In the best of all possible worlds, staffers at Initiative and Universal would expect IPG to base its future strategy on having two clear media brands - as is almost the case at present. And Universal would be rebranded, shorn of its associations with McCann Erickson, and its chief executive would report to a new IPG media board.

Initiative would also report in to this new IPG structure, achieving, for the first time, a measure of group symmetry. Dooner's task, observers hope, will be to co-ordinate the development of group resources in two areas - proprietary research and the evolution of specialist group divisions.

Thus, he would tidy up the group's various offerings in areas such as advertiser-funded programming and direct media. It already has a group negotiation unit, Magna, which many insiders claim is better structured than Group M, its equivalent at WPP, or Omnicom's OPera.

The last item on the wishlist is problematic. Initiative staffers observed the contribution made by Sir Martin Sorrell to MindShare's Unilever pitch.

He helped hunt the business down with energy and attention to detail.

Some sources think (though they would never say) that it would be nice if David Bell, the IPG chairman and chief executive, took more of an interest in his media companies' business.

1. Initiative was created in France in 1975 and then began rolling out the concept across Europe in the 80s. Lintas media departments had been re-engineered across the whole of Europe by the late 80s and the network was given formal structure with the formation of Initiative Media Europe in 1992, with Marie-Jose Forissier as chief executive. Through the 90s, the process was repeated in Latin America and Asia as Forissier became the chief executive of Initiative Media Worldwide. In 1999, Initiative merged with IPG's US media brand Western International Media, which had also been the media vehicle for Lowe Group outside the US.

2. Initiative has 3,500 employees in 99 agencies in 51 countries. Its clients include Agfa, AOL, Bayer, Burger King, Continental Tyres, Interbrew, Nestle and Unilever (outside Western Europe now, obviously). Its global billings are estimated at $18.7 billion.

3. Initiative is run by regional bosses who report to Alec Gerster, the chief executive of Initiative Worldwide. He, in turn, reports to David Bell.

4. The loss of Unilever is its biggest blow to date and is not without historical significance. Lintas was once Unilever's in-house advertising department (Lever INTernational Advertising Service).

5. Universal was created in much the same way as Initiative on a rolling basis across Europe, with McCann Erickson in the UK one of the last to hang on to the idea of the full-service media department until the late 80s. Global billings are estimated at $15 billion.

6. Universal's client list includes General Motors, Microsoft, Goodyear, L'Oreal, Du Pont, Motorola, SC Johnson, Exxon and Mastercard.

7. Universal's chairman and chief executive, Robin Kent, reports to Dooner. In turn, Dooner reports to Bell. This is, some say, an unnecessarily long chain of command. Given that IPG is by nature conservative, this doesn't help Universal stay at the leading edge of innovation.

8. Magna is regarded as a success within IPG but rivals say it is neither big nor clever enough to compete with the likes of WPP's Group M. WPP is the world's largest advertising holding company with (according to Recma) 29 per cent of a global advertising economy of $162 billion. Publicis is second with 21 per cent and IPG third with 17 per cent.

WHAT IT MEANS FOR ...

IPG'S MEDIA PRODUCT

- The loss of Unilever and Nestle in Europe represents a wake-up call, though whether it is heeded is another matter. Much will depend on how radical Dooner is prepared (or allowed) to be.

- IPG insiders still make much of the fact that Initiative pioneered advertiser-funded programming and that it has been at the forefront of the use of analytical tools such as econometrics and other software advances in schedule optimisation. But the total has, arguably, always been considerably less than the sum of the parts.

- Rival groups say that IPG media agency presentations have an "old-fashioned" feel to them, focusing on tools and systems that were leading edge a decade ago but which are now regarded as "basic hygiene" by all the major players.

- Thus, those same rivals say, IPG may have to purge a whole generation of the old guard if a true change of philosophy is to be engendered. Many observers are willing to bet it won't happen.

RIVAL GROUPS

- IPG's soul-searching was triggered by the fact that Unilever seems to have set so much store on cost-cutting. There is already speculation that this will trigger a whole new wave of consolidation in the media buying and selling marketplace.

- Alternatively - and this has already started in the German market - the notion of buying clubs could return to the agenda. In Germany, Omnicom and Publicis have formed a buying consortium to combat the increasing dominance (and the media buying discounts it will be able to achieve) of Group M.

- Rivals are not crowing too loudly over IPG's media woes. There will be continuing opportunities in the short term to steal business from IPG - but they acknowledge that members of the "super league" never stay down for long.