Elliott Management's activist position in Interpublic Group (Part 5 of 7)
Digital services expansion
Paul Singer’s hedge fund Elliott Management disclosed an activist position in the advertising firm Interpublic Group. According to unconfirmed sources it’s looking at pushing to sell the company.
Interpublic (IPG) has digital specialist agencies, led by R/GA, Huge, and MRM. It has been expanding its digital services offering through acquisitions. Last year, IPG’s media innovation arm IPG Mediabrands acquired India-based Interactive Avenues, an independent full service digital agency. In early 2014, IPG’s creative agency Lowe acquired UK-based Profero, a global digital network. The management said on the acquisition that, “Embedding digital talent and capabilities throughout our organization has been a key strategic priority for IPG ” and adding “Digital sits at the core of all future advertising.” The acquisition will enable the two networks to focus on building a fully integrated offer in five key global locations—Australia, China, Singapore, UK, and the U.S. before expanding into other markets.
IPG believes that the media landscape is evolving at a rapid pace and as media channels continue to fragment, clients face a complex consumer environment. The expansion of internet and the increasing growth of connected smart devices and technology innovation are leading to a proliferation of channels, consumer interactions, and real-time data. The company noted, “The challenge facing every brand and business today is staying relevant in this evolving world.” The company expects to face these challenges by investments in creative and strategic talent in fast-growth digital marketing channels, high-growth geographic regions, and strategic world markets.
eMarketer estimates that digital ad spending will increase 16.7% this year, totaling $140.15 billion and surpassing 25% of all media ad spending for the first time. In terms of digital advertising market share, eMarketer forecast that, “Google (GOOG) will continue to dominate the global digital ad market this year, netting 31.45% of digital dollars invested by advertisers worldwide.” The research stated that Facebook (FB) and Twitter (or TWTR) will increase its market share this year while Microsoft (MSFT) will increase its share of share of the $140.15 billion digital advertising market, surpassing Yahoo (YHOO). Gartner’s Digital Marketing Spending report said that marketing leaders allocated 12.2%—the biggest share of their digital marketing budget—to digital advertising in 2013.
News reports noted that Profero was one of the few remaining independent international digital agencies. According to an industry survey by AdMedia Partners, the most sought after areas of interest for expansion or acquisition were analytics, social, digital, and mobile. IPG peer WPP (WPPGF) acquired AKQA and Cognifide while Publicis Groupe has enhanced its digital marketing portfolio with the acquisitions of Digitas, Razorfish, Rosetta, Big Fuel, and LBi.
Interpublic to expand programmatic buying service
The company also expects to continue its investment in programmatic buying and to fully automate half of its media investments by 2016. In a study, Magna Global, IPG Mediabrands’ investment intelligence unit, revealed that by 2017, 80% of cross-format ad spend—display, video, mobile—will be transacted programmatically in the U.S. International markets will see a 240% growth in programmatic spending from 2013. Digiday defines programmatic buying as “the use of software to purchase digital advertising, as opposed to the traditional process that involves Requests For Proposals (or RFPs), human negotiations, and manual insertion orders.” Magna Global recently forecast that programmatic spend will increase to reach $37.5 billion globally, and $17 billion in the U.S. by 2017, of which over $10 billion will be real time bidding (or RTB)-based.
During 2013, IPG Mediabrands announced the formation of the Magna Consortium, designed to accelerate the adoption of integrated automated and programmatic media buying solutions for digital media channels. Founders include IPG Mediabrands, A+E Networks, AOL, Cablevision, Clear Channel Media and Entertainment, and Tribune. Since the announcement the group has expanded to also include ESPN. Available inventory includes display, video, mobile, digital out-of-home, radio, and TV.
IPG Mediabrands is aggressively expanding its Cadreon programmatic buying service, with the recent launches in Latin America and South Africa. Cadreon is an independent digital performance platform that integrates technology, data, and inventory to target audiences in real time. It ensures that inventory is purchased in real time, and that clients enjoy the true efficiencies of real time bidding (or RTB). Cadreon’s rival trading desks include Publicis Group’s VivaKi Audience On Demand, WPP Group’s Xaxis, and Omnicom Group’s Accuen.
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