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As Publicis returns to growth, CEO Sadoun underscores promise of e-commerce

Against the odds, Publicis Groupe has posted a return to growth for the first quarter of 2021

Publicis Groupe has pipped market expectations, with its Q1 financial results marking a return to growth amid wider global economic instability. Speaking to The Drum, chief executive Arthur Sadoun says the number was buoyed by “disproportionate” digital investment and discusses what clients want from the current media pitch frenzy.

Against the odds, Publicis Groupe has posted a return to growth for the first quarter of 2021, with organic revenues getting a boost of 2.8% ending a streak of declines.

The upward trend was bolstered by growth in the US and APAC regions, as well as a “disproportionate” shift towards digital services, including e-commerce and direct-to-consumer marketing campaigns which are becoming an ever-crucial part of the Groupe’s offering to clients.

Publicis Groupe’s total net revenue, which strips out pass-through costs, noted a year-on-year decline in the first quarter to $2.86bn (€2.39bn.) Last March the same figure sat at $2.97bn (€2.48bn) just as the pandemic began to take hold. However, the Groupe has now cushioned the blow of the Covid-19 crisis thanks to organic growth in North America, Asia Pacific, Europe and Latin America, exceeding analyst expectations.

Organic revenue rose 4.7% in North America, including a 5.1% increase in the U.S.; 5.7% in the Asia Pacific region; and 7.7% in Latin America, the company said. It declined 1.8% in Europe (where heavy restrictions are still in place across some markets) and 11% in the Middle East and Africa.

For Sadoun, Publicis ‘Power of One’ model, coupled with its digital pro has played a key role in helping the business return to recovery, after growth decreased by as much as 13% during the worst of 2020.

A shift in investment towards digital channels, e-commerce and DTC, saw Publicis’ online media revenues enjoy a “double-digit boost” in Q1. This was buoyed, said Sadoun, by the acceleration of Publicis Sapient’s growth in the US which sat at 11.2%. Epsilon, the data business acquired by Publicis last year for $4.5bn, also played its part – posting 4.7% growth for the second quarter in a row.

Digital transformation business Publicis Sapient, which has been led globally by longtime Publicis exec Nigel Vaz since 2019, is clearly a jewel in the holding company’s crown. Sadoun and Vaz have doubled down on its North America operations, with the chief exec saying this is now “starting to pay off”.

“Its double-digital growth is very unexpected,” said Sadoun. “There’s an increased appetite from clients to go direct-to-consumer, built their own ecosystems and deliver commerce. So we’re benefiting from capturing a disproportionate part of these investments.”

Clients under pressure to deliver 'personalization at scale'

Indeed, the pandemic has accelerated the shift away from physical stores to digital shopping by roughly five years, with eMarketer pitting that retail e-commerce sales grew by 27.6% globally last year to $4.2tn.

Against this background, advertisers have moved spend into owned and third-party online retail channels, leading budgets to shift to platforms such as Amazon which captured 10% of the US digital ad market last year.

Amid this, e-commerce is becoming an increasingly important proposition for ad networks like Publicis.

Rival WPP has also zoomed in on this area, with chief executive Mark Read making several acquisitions since the start of the year to bulk up its digital shopping expertise – including DTI Digital, a Brazilian software engineering firm and mobile commerce shopping app platform NN4M. According to Forrester, WPP is now considered a ‘global commerce leader’.

Among its new business wins this year, Publicis Groupe has added shopper marketing for Unilever in the US to its belt, underscoring how crucial a pillar e-commerce is becoming for the business. It also added media buying for L’Oréal in China and Samsung in the States and is now the data AOR for Ab InBev.

Sadoun observed that clients are currently facing pressure in three key areas: cost, delivering growth and providing consumers with personalization at scale which is putting pressure on marketing models. On the latter point, Publicis Groupe has just backed Unified ID 2.0, an identity solution being built by The Trade Desk to pick up the reins from the soon to die third-party cookie.

These client demands mean the pitching pipeline is currently “very busy” for every holding company, the chief exec said – and he’s right. In the past few months alone Facebook, Unilever and Dyson are just some of the brands that have kicked off significant global media reviews.

So what is it brands actually want from their new media partners?

“Clients want agencies that can help them shift away from third-party cookies to maintain direct relationships with consumers. They also want to strike the right balance between paid media and owned. Lastly, they’re looking for efficiencies, because at the end of the day they need results. These are the three things that are common to every pitch right now,” asserted Sadoun.

While digital sparkled for Publicis, growth was largely flat for its suite of creative agencies, which includes BBH and Leo Burnett. However, the boss advised it would be a “big mistake” to disconnect media and creative.

“Our clients are still buying into us for big, strategic, creative business ideas. I don’t like when we talk about ‘creative agencies’. I’ve seen great creative ideas at Sapient and Spark44.”

“The mistake is to disconnect the two and it’s a mistake competitors like Accenture have understood very well. This is why they’re buying the likes of Droga5, because, at the end of the day, creative and media, data and technology, deliver personalization at scale.”