Credit: Maarten van den Heuvel via unsplash

Global advertising group IPG, like its competitors, saw growth return to and surpass pre-pandemic levels in 2019.

The business boom comes as the economy opens up relief value to meet pent-up demand.

But how long can growth continue?

All the major advertising groups that published their results for the December quarter forecast future growth, but at a reduced pace

IPG’s organic growth for the full year to December was 11.9%. In the December quarter, organic revenue growth was 11.7% compared to the same three months of 2020. Compared to the same pre-pandemic quarter of 2019, the increase was 5.7%.

IPG now expects 5% growth in 2022.

CEO Philippe Krakowsky on the advertising market: “I would rate the overall environment as healthy.”

He said in a briefing to market analysts: “Clients, clearly, for a multitude of reasons, want/need to understand the value of being active in the market. And I think that’s across a wide range of channels, although the focus is clearly on deepening relationships with consumers. »

The highest demand area is for services and capabilities with a greater digital component and a data-driven component, says Krakowsky.

“But there is still a strong need for reflection and work that will bring brands to life in mass media,” he says.

It highlights Super Bowl 2022 where IPG customers make the news on a highly effective platform.

The other area of ​​demand is for integrated campaigns, to land and articulate an idea across a full range of touchpoints.

“When a marketer launches a new product and seeks to differentiate their service, they see the value,” he says.

Experience and events are also coming back after dropping around 85% in 2019. “I think what’s positive is that we’re clearly not going to see any lockdowns. The lingering effects of COVID somehow seem to be normalizing.

A slide from IPG’s market analyst briefing:

ipg fourth quarter 2021 revenue by client sectors.jpg

He says there is definitely a broader recovery underway.

“But I think there’s also a shift towards an understanding that you can – and need to have a voice in the market given the complexity of what’s happening, the speed of what’s happening… clients…must drive their story, their franchise forward.

The strongest growth areas are media, data technology and healthcare.

“We are confident that the continued strength of our offerings positions us well in a dynamically changing environment for media and marketing, coupled with a strong global macroeconomic environment.

“Of course, we are aware in the coming year of uncertainties and challenges from COVID to inflation and geopolitical risk.

“Yet, looking ahead, we expect 2022 to be another year of strong growth, on top of industry-leading multi-year comparables. As such, we are targeting 5% full-year organic revenue growth in 2022.

“And with this level of growth, we expect that in 2022 we will consolidate the very significant gains made in the adjusted EBITDA margin over the last 24 months at a level of approximately 16.6%.”

Of course, with increased revenue comes increased cost. Salaries are within the framework.

Krakowsky: “In light of the current environment, our outlook also includes a modest inflationary impact on our investment in employee compensation this year, which we are actively managing to support our strong growth. This aligns with what I think we all see reported across a wide range of industries.

But the costs taken out of the business at the height of the pandemic are paying dividends.

IPG cut 1,500 jobs globally and reduced its real estate footprint by 15%.

In the December 2021 quarter2, total salaries and related expenses as a percentage of net sales was 62.2%, compared to 58.9% in the fourth quarter of 2020 (when temporary salary reductions were still in place for some senior teams).

Krakowsky: “We expect our spending on employee performance-based incentives to return and be in a more normalized range consistent with our longer-term history.

“We also expect to continue to see structural benefits from our 2020 cost actions, most of which were seen in 2021 and will continue to be evident going forward.”

A slide from the IPG market analyst briefing:

IPG expenses Q4 2021

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