Arthur Sadoun at the World Economic Forum in 2023. Credit: World Economic Forum/Walter Duerst
There has been plenty of commentary around Publicis Groupe’s ongoing hot streak, as it’s consistently outperformed the other big agency groups over the past few years in terms of organic revenue growth. The agency group’s investment in data, the charisma and work ethic of CEO Arthur Sadoun, and the company’s simplified internal structure have all been cited as driving factors. Recently, another suggestion has circulated around the industry: that Publicis is using the strength of its balance sheet to offer prospective clients better payment terms than its competitors, in order to win pitches.
Following another strong quarter for Publicis, with today’s Q3 results showing 5.7 percent year-on-year organic revenue growth across the company, Sadoun was asked about this theory on an earnings call. The CEO said he’d heard this claim too, which he said was being made up by “very desperate players in our industry,” and asserted that it’s not true. Publicis, according to Sadoun, proactively avoids any pitches that come down to price or payment terms rather than strategy, though he suggested that some of its rivals pitch wins over the past quarter were won solely on price.
But he went even further than that, claiming that the strength of Publicis’s AI offering means that in some cases, the group is winning new business without having to pitch at all.
“We have been able to convince very big brands with material accounts to move to Publicis without a pitch for a single reason,” said Sadoun, “which is that AI allows us to differentiate even more and leverage our capabilities in a unique way. That means that when clients come to a moment to choose a partner, they are arbitrating between one that can truly help them with material business impact today, thanks to AI, and others that maybe won’t be able to do it. And as they need results immediately, we have seen a couple of pitches that have been stopped, and the business has come to us.”
All in on AI
AI very much took centre stage in today’s earnings call, which marked a bit of a change in tone from the French group.
While other holding companies have based their positioning almost entirely around AI, Publicis has tended to instead emphasise its strength in data and identity. That’s not to say AI hasn’t been framed as a major part of Publicis’s strategy. Indeed, AI is a key component of Publicis’s data and identity tools. But on Publicis’s first earnings call this year, Sadoun stated that Publicis isn’t positioning itself as an AI business, and talked about it still being early days in terms of impact on margins and establishing use cases.
Today however, Sadoun was clear. “If there’s one thing I want you to take away from this morning’s call, it’s that we are winning today thanks to AI,” he said. Publicis, he claimed, has been quicker than its rivals to put AI at the heart of its strategy, giving it an advantage over competitors. “The more demand for AI grows, the wider the gap with our competition becomes,” he said.
Demand for AI products helped fuel growth over the past quarter, according to Sadoun, and AI is now deeply embedded across all three of Publicis’s business units. Around 80 percent of its ‘connected media’ business is “AI-enabled”, compared to a third of its ‘intelligent creativity’ unit.
Sadoun laid out a few major use cases. On the media front, he said it’s the ability to connect paid media to influencers and to commerce which is driving value. For example, Publicis can spot an individual through its identity database, understand which influencers are relevant for them, and then lead them directly to a retailer’s website. For creative, it’s the ability to optimise content against a client’s business outcomes which is proving popular. And for Publicis’s digital transformation arm Sapient, a lot of clients are using AI to break down internal silos and make their businesses more flexible and efficient.
Overall, Publicis says its AI investments are helping keep client spend growing, driving high retention rates, and opening up new addressable markets, as well as helping it win new business. Despite continued challenging market conditions, the group says it expects to outperform the market next year, thanks in part to its new business wins so far this year.
Market scepticism
Not everyone seems convinced by Publicis’s line (which is also echoed by the other agency groups) that AI represents a growth opportunity for the holding companies. Despite Publicis’s consistently strong organic growth, and the fact that it’s raised its full-year guidance, the company’s share price is down by nearly 20 percent since the start of the year. One analyst on today’s call mentioned uncertainty around how AI will impact the competitive landscape.
One interesting data point shared by Sadoun is that for Publicis’s top 100 clients, no client spends more than four percent of their budget on a single platform or media company. One of the concerns around AI from an agency point of view is that companies like Meta, Amazon, and Google are creating products which do more and more work which would traditionally be done by an agency. But Sadoun believes that even if this is the case, brands will still need agencies to help connect up and work across all these different platforms.
So where will Publicis’s biggest competitive threat come from? Perhaps unsurprisingly, Sadoun said it will be a company which has the same ability as Publicis to connect up different platforms, with the right structure, the right people, and the client trust which is necessary to do so. And again unsurprisingly, Sadoun said he sees no such rival in market right now.
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