IPG Unfazed Despite GM's Foot on Adspend Brake

20 March 2007

NEW YORK: Interpublic Group revenues accruing from its largest client, General Motors, took a 20% global hit in 2006, falling by $100 million (€75.15m; £51.49m) to $400m, according to an estimate by Advertising Age. Bad news for the world's number three agency holding company?

Well, not as painful as it might seem at first sight - thanks to the PPP (the Penny-Pinching Paradox), a phenomena known even in gilt-edged times to all agencies servicing global mammoths.

In 2006 Interpublic reported total revenues were no worse than 'flat' - even in the face of substantial cuts in GM's adspend, thereby implying that the PPP effect had kicked-in, compensating for lost GM income with other, more margin-friendly, accounts.

The auto titan's 2006 ad-slashing is detailed in a Form 10-K filing with the US Securities and Exchange Commission. It provides a detailed overview of a company's business and financial condition and includes audited financial statements.

According to the 10-K, GM last year spent 2.6% of its total revenue on advertising, down from 3% in 2005 but above the average 2.4% it spent in the period 1995 to 2004.

Moreover, the slippage is far less drastic than prophesied last week by TNS, which estimated that the auto giant cut US spending by 23.7% ($713m) to $3bn. TNS, unlike GM, bases its figures on ratecards.

Which suggests that the bullish mood adopted by IPG chairman/ceo Michael Roth (pictured) at a Bear Stearns conference earlier this month was founded on fact rather than front.

Commenting on GM's recent switch of its $190m Saturn account to IPG shop Deutsch Los Angeles, Roth beamed: "To be able to win Saturn, frankly, without a competitive pitch, shows you that our relationship with General Motors is very solid."

Data sourced from AdAge.com; additional content by WARC staff