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Publicis chief lauds Epsilon ‘halo effect’ as ad giant beats Q3 expectations

Between July and September, the owner of Saatchi & Saatchi and Leo Burnett reported a 5.6% decline in net year-on-year revenues / Publicis Groupe

Publicis Groupe’s Arthur Sadoun has lauded its ‘Power of One’ approach, organisational structure and acquisition of data analytics firm Epsilon for beating market estimates in the third quarter.

Between July and September, Saatchi & Saatchi and Leo Burnett owner Publicis reported a 5.6% decline in organic revenues on the previous year. The number was ahead of ad spend forecasts, which sit at 10%, and an improvement on Q2 when net revenues slid by 13%.

Speaking to The Drum, chief executive Arthur Sadoun underscores the US – which represents 60% of Publicis Groupe’s business – as having posted a particularly resilient performance. In Q3, organic growth in the US declined by just 2.4% against market forecasts of -7%.

Market by market, organic revenue fell 9% in Europe, including 10.6% in the UK and 13.8% in France. APAC was down 9% and North America 3%, including the 2.4% drop in the US.

Publicis has also been running a $540m cost reduction initiative, which has included salary cuts and staff redundancies and furloughs at country level. This is going to plan and has resulted in an operating margin rate slightly ahead of current analyst consensus of 14.3% for 2020.

‘Our model is working’

Sadoun credits the business’s ‘Power of One’ approach, which marries creative, media and digital for clients to form a single, comprehensive offering, as helping the agency network outperform the industry. In the past quarter alone the brand has onboarded and retained clients like TikTok and RB with the proposition.

”[The results] show that our model is working,” he says, adding that the company’s organisational structure has also set it up for success. He says the company has been a benefactor of clients shifting budgets into online and omnichannel strategies throughout the pandemic, owing to an offering focused on marrying creative and data (underpinned by its $4.5bn acquisition of Epsilon in Q2).

“Epsilon is having a halo effect across the organisation and our ability to offer personalisation at scale.” He adds that it has had a bumper effect in the US market, helping draw in fresh business.

However, with the current resurgence of the pandemic and the restrictions imposed, Publicis has recognised it has to be “cautious about Q4”, which might be impacted further and come below Q3 as entire markets re-enter varying tiers of national and local lockdowns.

“It’s clear that it’s far from being over. What matters at the moment is to show resilience and display the fact that we can manoeuvre and navigate this crisis.

“I don’t think anyone was expecting the resurgence of the virus to come back so strong. Things have roughly gotten back to where they were in April [across Europe], so we have to be very cautious.”

A post-virus vision for flexible working

As for a return to the office for 23,500 employees, Sadoun has already been firm that even when it’s safe for people to get back to their desks, a more flexible way of working can be anticipated.

In a video message to staff at the start of October, the boss said the Groupe has “exhausted everything that home working can teach us” and is banking on a vaccine to get everyone back to the office to “unleash our potential”.

He tells The Drum: “When this virus is gone, we’re going to find the right balance between working from home and being in the office.

“I’m a bit old school here, but I’ve spent my life working in agencies and I believe that bigger, stronger and bolder ideas emerge when everyone is in the same room. I believe that confrontation leads to better creativity. And I believe that we’re in a tough business and you need to do it.“

However, there’s to be no “one size fits all” approach for Publicis Groupe, where 60% of employees are single or living alone, 25% have young kids at home and 30% are under 30. Sadoun said it would be a priority to make sure that younger employees don’t “become invisible” and lose the chance to develop.

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