French agency holding group Publicis Groupe released its Q1 financial results this morning, reporting 4.9 percent organic growth year-on-year, and reported net revenue growth of 9.4 percent year-on-year. The company also strongly reaffirmed its full year guidance of organic growth between four and five percent, a show of confidence given the turbulent macroeconomic conditions facing businesses across the globe.
But Publicis CEO Arthur Sadoun said that his company’s expected performance isn’t reflective of the wider agency market. Rather, it comes down to Publicis’s investments in identity graphs and connected media, which encourage clients to keep spending even when times are tough.
“We have built the products and the services that our clients need to drive profitable growth in good times and particularly in more challenging times,” said Sadoun.
“Mr. Client, don’t judge us on our marketing outputs”
Sadoun’s argument is essentially that Publicis’s investments in data and identity enable it to more efficiently target and measure ads, driving direct results for advertisers even during difficult macroeconomic conditions.
While some investors may disagree, advertisers still generally categorise marketing as operating expenditure (OpEx) rather than capital expenditure (CapEx), according to Sadoun. Clients may pause CapEx during uncertain economic conditions — and indeed Sadoun said this has been the case with Publicis Sapient, Publicis’s business transformation arm. Unlike Publicis’s ‘connected media’ and ‘intelligent creative’ units, Sapient’s revenues were down year-on-year in Q1, as clients are taking a ‘wait and see’ approach to investment.
With advertising and marketing however, clients don’t think the same way. “I think everyone knows that at the moment you stop investing [in marketing], you lose market share that is very difficult to take back,” said Sadoun.
That’s not to say advertising spend is immune to cuts during economic turbulence. In fact quite the opposite. Ad expenditure is often be one of the quickest cuts a business can make when it needs to improve its balance sheet. But if advertising can prove it’s contributing to short-term business growth, clients will keep spending. And Sadoun says Publicis’s investments in data and identity enable it to deliver and demonstrate these short-term results.
“We have built the industry’s strongest and most connected media ecosystem from paid, earned, shared, and owned media, driving efficiency for our clients and optimising their marketing spend, linking it directly to business outcomes,” said Sadoun. “We are saying to every client today, ‘Mr. Client, don’t judge us on our marketing outputs, i.e. how well our campaigns are working. Judge us on our ability to deliver business results for you,'” he added later in the call.
InfoSum: an “empty shelf”?
All the agency groups have invested in data capabilities in recent years, and all talk about their ability to drive and measure direct outcomes. But Sadoun maintains that Publicis sits in a “category of one”. Its acquisition of Epsilon in 2019 gave Publicis ownership of a massive identity graph, which was bolstered (particularly outside the US) by the purchase of Lotame earlier this year. Overall, Publicis says it now has visibility over 91 percent of all adults on the internet globally.
Sadoun claimed that his company’s results and new business wins demonstrate that clients also see the difference. “There are even some clients that are deciding to move to Publicis without truly doing a pitch, but just a couple of weeks to kick the tyres […] everyone is coming with a data solution, and everyone is claiming that they have the best, but when you start to kick the tyres, reality comes to the surface, and it’s translated into new business,” he said. “We can all say we’re great, at the end of the day it’s the numbers that talk.”
WPP, one of Publicis’s major competitors, made a big investment of its own in data and technology just a few weeks back, with its acquisition of data clean room InfoSum. WPP executives say this fits into a broader data strategy based on AI-driven federated learning techniques.
This, according to GroupM CEO Brian Lesser, will allow WPP to move beyond individual identifiers and identity graphs, which he says will always have gaps. “Traditional ID solutions like those grounded in email addresses only learn from overlapping data points, relying on outdated lookalike models that limit insights,” he said earlier this year. “Using technologies like federated learning, we can create shared knowledge and predictions across all of our partners without sharing raw data, and activate via a simple connector.”
Unsurprisingly, Sadoun says he isn’t convinced. Asked directly about WPP’s acquisition of InfoSum, Sadoun said he views clean rooms as commodities. “Clean rooms alone are an empty shelf,” he said. “If you don’t power a clean room with identity, you can’t find new sources of growth. If you don’t add proprietary data that will bring to your clients something that they don’t have, they won’t find new sources of growth. They won’t be able to connect every individual to the entire media ecosystem.”
“Maybe the most important thing is that you can’t truly measure performance because you have to measure it in every environment instead of one,” he added. “So you definitely need this connected identity graph.”
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