DOW JONES NEWSWIRES 
 

Interpublic Group of Cos.' (IPG) fourth-quarter net income rose 22% on improved margins as the advertising and marketing company said the economic downturn is starting to have a negative effect.

The industry has been battered by the recession as companies cut back on advertising while consumers rein in their discretionary spending to save money.

Longtime media industry consultant Jack Myers said in December that the ad market was in an "advertising depression" and would see three straight years of declines in ad and marketing spending in the U.S. starting this year.

The soft economy is likely to force job cuts at ad firms, as new accounts are less likely to materialize and existing ones get scaled back.

Chief Executive Michael Roth said the company met its goals for last year, but "the latter part of the fourth quarter and the early part of 2009 have begun to show the negative effect that the broader economic situation is having on the marketing-services sector."

The parent company of DraftFCB and McCann-Erickson posted net income of $217 million, or 39 cents a share, up from $178.4 million, or 31 cents a share, a year earlier.

Revenue decreased 4.1% to $1.9 billion, as a negative impact from the stronger dollar offset gains from acquisitions, as organic revenue fell 2.2%.

Analysts surveyed by Thomson Reuters expected earnings of 29 cents on revenue of $1.92 billion.

Operating margins rose to 17.4% from 13.7%.

U.S. revenue declined 6.3%, while international revenue slid 1.9%.

The company's media-buying unit, Mediabrands, recently developed its own online advertising system in order to push into the online space. The tool creates custom digital ad marketplaces for clients and creates a database for the marketer so companies can place ads that appear only to the consumers they are trying to reach.

In a move considered slightly risky, Interpublic replaced ad-and-marketing unit DraftFCB's chief executive, Howard Draft, one of Madison Avenue's best-known personalities, earlier this month. Draft will continue at the company but will focus on relationships with clients.

Interpublic's shares closed Thursday at $3.56 and haven't traded premarket. The stock has lost 59% of its value in the last year.

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; kerry.grace@dowjones.com