Arthur Sadoun has said Publicis Groupe’s recovery from the pandemic is happening faster than expected and it should recover all of last year’s revenue decline in 2021, rather than 2022. But he is “extremely worried” about the ongoing impact on the mental health of staff after nearly 18 months of Covid.
Sadoun, Publicis chief executive and chairman since 2017, said in an interview with Campaign that Q2 2021 was a “very strange quarter” because 17.1 per cent organic revenue growth followed a dramatic 13 per cent plunge a year earlier during the worst of lockdown.
For the full year, he predicted 7 per cent growth in 2021 versus a 6.3 per cent decline in 2020 – an upgrade on previous expectations.
France’s Publicis Groupe has been one of the best performers of the big six agency groups since the start of the pandemic, although US rival Interpublic was more bullish at its Q2 results earlier this week as it forecast revenue growth of 9 per cent to 10 per cent in 2021 after a 4.8 per cent decline last year.
Here is Campaign’s interview with Sadoun about the quarterly results:
Q2 2021 was always likely to be the strongest quarter for year-on-year growth compared with 2020. What have been the key trends for Publicis Groupe?
In the first half of the year, we had a very strong performance thanks to our model, in an improving business environment. Not only did we fully recover the revenue lost in 2020, but all of our KPIs over the first half exceeded 2019 levels.
In Q2, we posted 17.1 per cent organic growth, versus a decline of 13 per cent last year. This means that we erased the effects of the pandemic and actually grew 2 per cent versus 2019.
This over-performance was largely driven by the US and Asia, which both grew 7 per cent compared to 2019. Our US operations posted 15.2 per cent organic growth in Q2, with Epsilon and Sapient both delivering above 25 per cent. Asia also accelerated further with 13.6 per cent organic growth. Europe rebounded from a low base to grow 23 per cent, mirroring the progressive lifting of lockdowns.
What about the UK, where revenues grew only 10 per cent in Q2?
Media and creative grew by about 20 per cent, while Publicis Sapient was impacted by a couple of financial services clients that have materially reduced their spend this year. It was something that we had anticipated. As you have seen, Sapient is working incredibly well everywhere and it has been a growth driver for the UK for many years and will be again. I am very pleased with what is happening in the UK overall.
Every agency group has reduced property and other costs, such as travel, since the pandemic and now revenues have bounced back and your first-half operating margin was a record 16.5 per cent. How much do you see this as an opportunity to increase profit margin permanently and make the agency business more attractive to investors?
We have had industry-leading financial ratios for some years. Thanks to the strength of our model, our [full-year] margin should return to 2019 levels this year instead of the next, as we had originally anticipated. But this is not profit margin for the sake of profit margin. At Publicis, for decades now, we have been using our strong balance sheet to make bold investments in our transformation.
Sapient, and more recently Epsilon, are two examples that today position us to address and lead the revolutions we are seeing in our industry, accelerated by the pandemic. The best demonstration of that is Epsilon growing by 31.1 per cent and Sapient by 27 per cent in the US this quarter.
There are a lot of pitches in 2021. Are clients asking for anything different this year – for example, the role of creativity, e-commerce, production, Sapient, etc?
Whether it is a creative or a media pitch, the overall goal is the same: a new model to win in a platform world. Every client understands now the need for first-party data in a cookie-less world. Creativity has never been so important to justify the value of their products and services. Smart, scaled media is vital to navigate the walled gardens, and technology is key to go direct to consumers.
The question now is how to connect those capabilities whatever the brief, and whatever the pitch, to accelerate clients’ growth while reducing their costs. Our ability to do this has led to us once again topping the [COMvergence] new business rankings for the first half of the year.
WPP and Dentsu have both appointed global chief creative officers at a holding company level in recent months to signal their commitment to creativity. What’s your view about whether Publicis Groupe needs a chief creative officer and how has it changed since the departure of Nick Law to Apple in 2019?
What hasn’t changed is our commitment to creativity. We have drastically strengthened our creative bench, through our brands which are vital to us, with leaders like Chaka Sobhani, who has been promoted to Global CCO of Leo Burnett, or Bruno Bertelli, CCO of Publicis Worldwide globally, who brought to the network five Grands Prix at Cannes, for five different campaigns [Burger King, Carrefour, Heineken, Renault and Mexican civil rights group Propuesta Civica], a first in the history of the festival.
We also have brilliant creative leaders at the country and regional level, like Natalie Lam, who recently joined to drive disruptive, dynamic creativity for our clients in APAC.
What has changed is that we are also betting on a different model of creativity, that is driven by a diverse, collective, maker culture. That is exactly what we are doing with Le Truc [in New York], headed by Carla Serrano, which has attracted an incredible calibre of talent, like Neil Heymann, formerly of Droga5. And it is the approach behind our joint venture with Retrospect, an experimental creative studio focused on nuanced cultural perspectives, founded by Quinnton Harris, Ajene Green, Joy Ekuta, and Chijioke Amah.
The longer the pandemic goes on, the more people get used to working from home. How are you going to persuade your people to return to the office? Will you have to demand that staff must work a certain amount of time in the office (when it is safe to do so)?
On this subject we have to stay very humble. The safety of our people is our first priority, and we are taking a local first approach in accordance with country, city or state health regulations.
We don’t know exactly what the future will look like, but it will definitely be more flexible, after over a year spent in isolation. Marcel [an internal online platform for staff] was essential when we were all stuck at home. It is the platform supporting everything we are doing to drive a real desire to come back to the office. And it will be the key to building hybrid, fluid working models, with the office as the primary place of work. Actually, what I’m obsessed by the most is ensuring that all of our people have the opportunity to develop and progress as we face what is undoubtedly a new world, together.
There is anecdotal evidence that employee burnout and churn are on the rise across many industries, including the agency sector this year. How worried are you about the impact on mental wellbeing? Can clients handle pitches better? Do you see any evidence of a brain drain from the advertising industry?
Yes, I am extremely worried about the impact of the crisis on the mental health of the teams who have worked relentlessly to bring us through this past year. For the management committee, the mental well-being of our staff is one of our biggest concerns and we are taking a lot of initiatives on this front.
When it comes to the brain drain, I’m focused on how we retain and grow our people first and foremost, and also how we attract more than our fair share of the incredible talent looking for the right home. On this front we are seeing great talent coming back, like the former two co-presidents of Leo Burnett Chicago, Britt Nolan and Emma Montgomery, who after two years in another holding company returned to take on new leadership roles in Chicago and Australia.
Zoe Scaman, an advertising strategist in London, recently published an article, “Mad Men, Furious Women”, in which she recounted how a lot of women have suffered sexual harassment and bullying and she said some companies use non-disclosure agreements to hush up these stories. What is your view about harassment of women in the ad industry and what more can be done to prevent it – for example, ending NDAs?
Anyone who has experienced sexual harassment, discrimination or inequality in the workplace should report it, so that strong action can be taken, fast. To fight against harassment of every kind, making sure victims feel encouraged and supported to speak out is vital. This is why, in the UK as in every country, we have clear reporting mechanisms, with a commitment to immediately and thoroughly investigate every alert.
Elisabeth Badinter, vice-president of the Supervisory Board, and major shareholder of our company, is one of France’s most renowned feminists. Ensuring women occupy key leadership roles in our group is hardwired into our values. This is true at Directoire and Management Committee level, women run most of our major markets, our global strategy, some of our top networks and key clients, and have accounted for 50 per cent of our board members long before the question of quotas was raised.
Of course, this is still not enough, and we will continue to take concrete actions every day to make sure Publicis is somewhere women not only feel safe, but are also confident that they can progress to the very highest levels in our industry.
Maurice Lévy was elected for another four years as chairman of the supervisory board in May. What does it mean for Publicis Groupe and how would you describe your working relationship with him now that he has committed for another four years?
I was one of the voices that insisted that Maurice stay on board for four more years. His experience and knowledge of our industry is unparalleled and priceless for Publicis and for me. In the four years to come, we will work as we have in past four years, sharing the good, the bad and the ugly. He gave me his unwavering support in every bold decision, like the launch of Marcel and the acquisition of Epsilon. And so far, he still agrees to look ridiculous with me every year for the Annual Wishes [a company video message at the end of the year].
Some people are already looking ahead to 2022. Do you think the economic recovery that we have seen in 2021 is sustainable next year and what do you worry about?
Our objective is to fully recover from 2020’s losses in one year instead of two, as we originally anticipated. We think this recovery is sustainable, providing there are no major deteriorations in the global sanitary context. What will matter now is how to make growth sustainable and ensure everyone progresses individually and collectively.
To do that, we will continue to invest in our talent, in our product, and in our capabilities, to help our clients navigate the profound changes in the marketing landscape. We demonstrated that once again recently with the acquisition of CitrusAd, to build the next generation of identity-led, transaction-verified retail media network, knowing that by 2025 consumer-packaged-goods brands will invest more there than on linear TV.