Inside Arthur Sadoun's plot to shelter Publicis from further falls in ad spend
Arthur Sadoun has ended his first full year at the helm of Publicis Groupe with tepid results: a sturdy new business roster but a “modest” organic growth figure. In the face of declining traditional ad spend in the US, the chief executive is setting out plans to scale up and “accelerate” its business transformation offering in Sapient.
If Sadoun had any goal for his first full financial year as Maurice Lévy’s successor, it was to prove his freshly modeled ‘Power of One’ structure works. He’s confident he has done so – to a certain extent, at least – reeling off all the clients the group has won or retained and noting earnings per share rates have hit an all-time high.
Yet being ranked the number one company in new business league tables has not made up for a lackluster organic growth of 0.8%, a figure that sent US shares in Publicis falling by more than 7% when its annual results were released today (6 February).
The company cited a dip in ad spend in the US market – particularly among FMCG clients – in its statement to investors: the region saw a 4.7% decline in net revenue between 2017 and 2018, leading to 0.8% fall in organic growth.
Sadoun admits the growth figure “is definitely modest and needs to be improved”. However, he points out, debts in the company have dropped significantly – from €51m to €22m. It also spent less on acquisitions in 2018 than it budgeted for.
This means the chief executive now has cash on hand to accelerate his four priorities for the company going forward.
A foot on the accelerator
The first is to “accelerate the transformation of our relationship with our top clients”, making sure every aspect of the Publicis offering can be delivered to clients on a wholly global scale. Sadoun will oversee this transformation himself, supported by new hire Ros King, who was previously director of innovation and communications and now takes on the role of executive vice-president of global clients.
Secondly, Sadoun promises that while the group’s agency brands are safe in the wake of consolidation at WPP and ICF, the streamlined ‘country model’ currently live in select markets will be rolled out across the business. The strategy aims to break down silos between agency brands in each country under a centralized team, and Sadoun points to the UK business’ growth of 3.8% to prove it works (Annette King was hired from Ogilvy to lead one of the first country teams).
Perhaps the most important play in Sadoun’s future proof game book, however, is his plan to scale the “game changer” offerings: data, “dynamic creativity” and technology. In its statement, the group earmarked these areas as key to mitigating any further drop in traditional ad spend across the full spectrum of sectors, noting that this side of the business grew 28% in 2018, despite representing 12% of the company.
Steve King has been tasked with building the marketing transformation side of the company – namely, building five “very strong global practices” in data, dynamic creativity optimization, production, commerce and investment. However, it’s the business transformation offering that will be pivotal to Publicis’ future success.
Competing with business transformation
Sadoun believes investing in Sapient in particular will put the group at an advantage, not just when going up against its Big Six rivals but also when it faces consultancy contenders at pitch.
“Of course, we can compete with WPP and Omnicom on the marketing transformation side of things,” says Sadoun. “But the difference between those guys and us is we have Sapient, and Sapient is actually a direct competitor of Accenture or Deloitte."
The chief executive still expects further attrition of traditional ad budgets next year. But, "the question is, how fast can we adapt to the new needs [clients] have? And how can we make sure we can help them not only in their communications, but also in their business transformation?"
Nigel Vaz has been promoted to chief executive of Sapient globally to “accelerate” the development of this arm of the business, and Sadoun hints a substantial proportion of its investment – the fourth point in his list of his priorities – will go towards growing the agency through M&A.
“It could mean some acquisition of a reasonable size because what we want is to strengthen our bench with talent and expertise,” he says. “We know that every time we strengthen our offer we grow.”
Despite its lead role in Publicis’ future proofing strategy, Sadoun will not name Sapient as the group’s messiah in this time of transformation.
“The reason we've won what we’ve won is not because we are an expert in one of those businesses, or one of those game changer [areas of] expertise,” he says.
“It's because we know how to connect them to create real value."
IPG, Omnicom, Denstu Aegis Network and Havas owner Vivendi are poised to release their full year results later this month. WPP will publish in early March.