Arthur Sadoun: Even though they are growing at a low single-digit rate while other areas of the company are growing more quickly, creative agencies are still “essential” to Publicis Groupe’s offerings.
Publicis’ CEO denied that the company’s slow-growing creative division was “a drag” on the overall business, which grew 7.1% in Q2 with media up “double-digit.”
Despite the fact that creativity is “not accretive to growth” or won’t help Publicis grow more quickly, he acknowledged that it is still crucial because clients need to “connect data with creativity, media, and technology.”
Saatchi & Saatchi, Bartle Bogle Hegarty, and Leo Burnett are a few of Publicis’ creative partners. Rivals like WPP and Dentsu have previously reported that the creative industry has grown more slowly than other fields like media. MSL is its primary PR network.
Sadoun, a former boss of TBWA Paris who has experience running creative agencies, also discussed with Campaign why Publicis sees an opportunity in artificial intelligence and how the company will be raising average salaries for employees by 4% in 2023.
Discussion with Arthur Sadoun
In the first quarter of 2023, Publicis outperformed its top competitors. What can you tell us about the remainder of 2023, and how would you characterize Q2?
Due to our distinct revenue mix and successful track record in attracting new clients, we continue to outperform the market in terms of organic growth, coming in 7.1% ahead of projections after 2022’s double-digit growth. After our competitors release their Q2 financial results in the upcoming weeks, we expect to deliver the best financial KPIs in the sector in H1.
By updating our guidance on all KPIs for the full year [with a forecast of 5% annual organic growth] in this first half, we are showcasing our resilience to business cycles at a time when there are still macroeconomic uncertainties.
Publicis’ creative division grew by a low single digit percentage compared to the group’s 7% growth, continuing a trend from the previous year. Is it accurate to say that the creative agencies hinder the business’s overall growth? Maybe it’s a hassle for everyone in the sector?
It isn’t a drag, in my opinion. In business, creativity is no longer accretive to growth, but in our case, we still believe that creativity is crucial to our own development. We are currently outperforming the market because of our ability to connect data in a novel way with creativity, media, and technology. Consequently, the core of our business model remains creativity. In today’s highly fragmented media landscape, it is supported by data and powered by technology to deliver game-changing ideas that can be personalized. Our Grand Prix in Cannes with Renault on Plug-Inn, a fantastic creative idea from Publicis Conseil brought to life by our cutting-edge capabilities, is a great illustration of that.
Perhaps you ought to have purchased the six-year-old UK creative studio Uncommon Creative Studio that your French rival Havas purchased last week?
The least you can say is that the United Kingdom has enough excellent creative agencies when you have BBH, Leo Burnett, the Campaign UK Agency of the Year, and Saatchi & Saatchi, which recently won the John Lewis award.
Publicis took the lead on media, data, technology, and production responsibilities as part of a significant global agency consolidation that Pfizer completed in Q2 (with Interpublic becoming the lead creative agency partner). How significant was the Pfizer evaluation? Furthermore, was there any broader significance in terms of Power of One-type integrations and what big clients want?
We no longer discuss any particular victory. I can tell you that, generally speaking, our large clients want to hasten their transformation so they can keep expanding while cutting costs. While fairly straightforward, achieving this in the highly fragmented media landscape is very challenging. They require a single media platform, a single data spine, and a production engine powered by creativity. And a compliant AI solution boosted all of that. We are uniquely positioned to accomplish this, as evidenced by our track record in winning new business, with [data unit] Epsilon powering creative and media through scaled personalization and [consulting arm] Sapient.
You stated that artificial intelligence is “clearly an opportunity for us” at your annual general meeting in May, but Maurice Lévy, the chairman of the supervisory board, also pointed out separately that another popular trend, the metaverse, has not yet been widely adopted. What gives AI a chance, and how soon will it transform public relations and other industries?
You should be aware, first and foremost, that my chairman is always correct: the metaverse has not yet gained widespread acceptance. But even so, nobody should underrate Web3’s potential in the future. We are uniquely positioned to lead the future of our industry, which will unavoidably be shaped by data, technology, and AI, thanks to our transformation.
Everyone has now learned about AI’s potential as a result of Chat GPT’s successful launch, which is the flavor of the day. Not at Publicis, where we adopted technology very early on. We have an unmatched advantage to ensure that our clients and employees can truly leverage AI to grow today, across all of our disciplines and internal processes, thanks to our €9 billion investment in cutting-edge technologies [like Sapient and Epsilon] in recent years.
Since its launch in January, working with cancer has been a personal mission of yours; it received the Cannes Lions Grand Prix. Currently, Publicis and four of your principal rivals—Edelman, IPG, Omnicom, and WPP—are requesting the assistance of agency creatives for the upcoming phase of the campaign. What else do you want people and businesses to do?
My personal mission now is to end the stigma associated with cancer in the workplace. Since we began, more than 700 businesses have endorsed our commitment to creating an open, encouraging, and recovery-focused workplace. A $100 million media investment helped our first global campaign change many people’s lives. But we are aware that this is only the start.
I was grateful to the Cannes Lions festival for organizing The Big C Brief and deeply touched that Richard [Edelman], Philippe [Krakowsky], John [Wren], and Mark [Read] immediately agreed to support the next phase of this initiative. What I am anticipating right now is that more businesses will join and that as much creative talent as possible will take part in this unique creative challenge to design the upcoming Working with Cancer campaign, which is scheduled to debut around World Cancer Day 2024.
After battling cancer the previous year, you attended Cannes Lions for the first time in 2019. Publicis also withdrew from the awards in 2018 because you thought the festival had grown too large. How would you rate the 2023 Cannes Lions? What do you think will happen to it?
The media loves to claim that we skipped Cannes in 2018 because it was an overly large festival. But this is incorrect. We didn’t just go to Cannes to raise money to launch Marcel, an industry-first AI platform that will transform how our employees interact, develop, and grow at work. We were laughed at at the time for believing AI could contribute to the creative sector. It was interesting to see that this time around, AI was the hottest topic on the Croisette.
This year’s Cannes was very busy, but it was also quite successful because we ended up being the best holding company in Europe, the second-best agency in the world (behind GUT Buenos Aires), and we won a few Grand Prix on significant clients with significant investments.
The average pay increase for Publicis employees last year was 8%, and inflation is still on the rise in many markets. What pay increases do you anticipate for 2023, and how do you strike a balance between rewarding employees and containing costs?
In recent years, we’ve changed from being a holding company to a platform. We are now able to deliver the best financial KPIs in the sector while compensating our employees better than the competition and absorbing wage inflation, thanks to the elimination of P&L silos, the implementation of a global delivery model, and accelerating on Marcel.
In contrast to our rivals, we raised our salaries by an average of 8% last year and our bonus pool by 20%, setting new highs. We already increased our salaries by 4% this year, and we intend to maintain the same level of variable compensation. Eighty percent of our employees have seen salary increases in the last 18 months, and every single one of them will receive a bonus in 2022.
Because nearly 95% of your revenue comes from outside the country, it was interesting to hear Maurice Lévy at your annual general meeting discuss the value of having international expertise on the supervisory board. Although Publicis is proud of its French heritage, nearly 60% of its revenue is generated in the United States, so in some ways, it is an American company. Why not relocate your primary listing to New York in order to draw American investors and earn a higher rating?
In fact, we take great pride in our French heritage and in the 97 years since Marcel Bleustein-Blanchet founded Publicis. Under the direction of just three CEOs—the founder, Maurice Lévy, and I—Publicis has been built piece by piece and step by step by incredibly great teams. In addition to [stock price and earnings] multiples, other factors to consider include history, culture, people, clients, creativity, innovation, and risk-taking. That is not exchanged for a number of points.
When you reached five years as CEO around this time last year, we asked you what Publicis would look like then. You advised waiting until the shareholders renewed your mandate, which they later did. More recently, they approved a unique “retention contract” that would keep you in your position for another five years. Additionally, you have stated on numerous occasions that Publicis’ transformation is “full.” So it would be appropriate to re-ask the question, “What will Publicis look like in 2027?”
You’re asking me to make future predictions, which is a risk and a trap but also, I know, a requirement of the job. People might believe that we struck it lucky by choosing Epsilon for data, Sapient for technology, and Marcel for artificial intelligence. It’s not luck, though. It is a commitment to the people, businesses, and ideas of the clients.
Yes, our assets play a role in why I say our transformation is finished, but I would argue that our integrated workforce of 100,000 people, who are trained, skilled, and transformation experts, plays a bigger role. I can only say that we are prepared for 2027.
To know more about Arthur Sadoun