If last year’s so-called ‘mediapalooza’ spate of media reviews was worth $20bn then the second part in 2016 will be worth $15bn, according to Publics Groupe’s chief executive Maurice Levy.
His speculative forecast for the year ahead casts a cautious shadow over the group’s prospects, which are tightly wound up in a restructure it hopes will allow it to do more for clients for less. Publicis Groupe admittedly endured a mixed time of pitching in 2015, losing General Mills, Procter & Gamble and Coca-Cola but winning advertisers such as Visa, Etihad and Taco Bell.
Such a furry of reappraisals has inevitably driven down the price of media, a decline that hasn’t been helped, Maurice wryly intimated on Publicis’ quarterly earnings call with analysts, by rivals claiming they can deliver certain numbers that in reality they cannot. Whether its true or not, Maurice’s observation reflects just how much pressure is on media agencies now that many companies are focused on the short-term with a greater appetite for cost-reduction rather than investment and product launches.
“[Advertisers] have always looked to reduce costs but that’s happening much more aggressively now and probably that's what's happening with some private equity firms and the way they are handling some large acquisition with zero-based-budgeting and with the fact that they are aggressively pursuing a dramatic shift in the way they are managing the operation,” said Levy.
And this quantitative approach to marketing is showing no signs of clearing in the short-to-medium term, which is why Publicis is racing to complete its restructure in the first half of the year. Its agencies are being reorganised into four hubs – Publicis Communications, Publicis Media, Publicis Sapient and Publicis Helathcare – each led by a chief client officer in what is a massive undertaking that would normally take a holding group or larger agency18 months before the benefit comes through.
“We will grow faster than any of our competitors as we have always done because we know that when we are going through a reorganization, we must move fast and we have always been in that mood and in that mode,” said Levy.
“We have our clients at the core. Client transformation will lead us to help them on consulting and technology, and this is something that we are determined to offer and we believe that this is something that we will develop as a specific offering. And integrated services, which is the alchemy of creativity and technology, that we are the best at delivering.”
2016 is a year of transition for Publicis, one that will see it try to conclude its reorganisation while at the same time capitalising on the rapid change in programmatic and mobile. Interestingly, Maurice also mentioned his business was watching what he called the “rise of the audience of Interrnet of the newspaper”. Success in all three will be heavily dependent on the ongoing integration of the Sapient business, which posted revenue growth of 5 per cent in the three months to December and generated €15 million of synergies in 2015, ahead of the €10m the company had predicted.
Sapient’s performance encapsulated a strong final quarter for the growth in 2015 as it looks to wrestle back the market share it lost amid the fallout of the failed Publics-Omnicom merger. Publicis' revenue in the period rose 2.8 per cent to €2.73bn in the quarter, spurred by strong demand in its biggest market North America.