UPDATE 3-Advertising woes weigh on Interpublic profit

* Q3 EPS 3 cents vs Wall St est. 1 cent

* Q3 rev fell 18 pct to $1.43 bln vs est. $1.42 bln

* Shares up 4 percent after better-than-expected results

* CEO says economic downturn still hurting revenue (Adds CEO comments from conference call, share move)

NEW YORK, Oct 28 (Reuters) - Interpublic Group of Companies Inc's (IPG.N) third-quarter profit dropped by more than half, as advertising clients showed little inclination to spend money on major marketing campaigns or events.

Interpublic leaned heavily on cost-cutting to combat the spending downturn and managed to report earnings that, while down sharply, were ahead of expectations. Shares of the advertising company, home to well-known agencies like DraftFCB and McCann-Erickson, rose 4 percent.

Still, Chief Executive Michael Roth acknowledged the company made less progress in the quarter than it had hoped, saying that advertisers "remain cautious about committing to new marketing expenditures or increasing spend behind existing efforts."

For Interpublic, which counts General Motors is one of its major clients, better times in the automobile industry would clearly help its efforts to improve revenue.

Roth said on Wednesday that "as the auto industry emerges from what has been a very troubled period, it could represent significant upside providers of marketing services with both existing and new clients."

Another positive is that corporations have once again started inviting advertising and media agencies into their offices to pitch for campaigns, Roth said. New business pitches were nearly nonexistent earlier this year.

Across Madison Avenue, agencies have cut thousands of jobs in response to a pullback in advertising spending from nearly every major industry -- auto, banking, technology and retail among them.

Interpublic alone cut about 5,100 jobs in the last year, around 11 percent of its workforce. In the third quarter, salaries and related expenses fell 13.7 percent to $943.5 million, and it said more job cuts were still ahead.

As for earnings, Interpublic profit fell to $17.2 million, or 3 cents a share, from $38.7 million, or 8 cents a share, a year ago.

The advertising company posted an 18 percent drop in revenue to $1.43 billion, just ahead of the $1.42 billion analysts polled by Thomson Reuters I/B/E/S had expected.

And it reported a 14.2 percent drop in organic revenue, a closely watched industry benchmark that excludes the impact of foreign currency and recent acquisitions.

Interpublic's rivals, including Publicis Groupe (PUBP.PA) and Omnicom Group (OMC.N), reported similarly tough results, with none of the big ad firms immune to the worst ad downturn in decades. Organic revenue fell more than 7 percent at Publicis and more than 10 percent at Omnicom.

But nearly every top ad executive has suggested that agencies are past the worst of it. Few see a major pick-up in ad spending in the fourth quarter, but instead have set their sights on 2010.

Shares of Interpublic, up about 55 percent so far this year, rose 23 cents to $6.34 on Wednesday.

(Reporting by Paul Thomasch and Franklin Paul, editing by Dave Zimmerman and Derek Caney)