• by Joe Mandese  @mp_joemandese, August 8, 2023

Agency holding company Stagwell has completed all of its planned personnel staff reductions -- most notably in its media operations -- and does not expect to make any additional ones through the second half of the year, CEO Mark Penn said during a webcast of the company’s second-quarter earnings results this morning.

Penn did not disclose the explicit impact of the staff reductions, but said they impacted Stagwell's media operations "especially," and that the company realized $35 million in "central expense reductions" as a result of it.'

He disclosed that Stagwell's staff costs as a percentage of revenue have been reduced to 64%, and that while additional staff reductions are not planned for the immediate future, the company's adoption and integration of generative AI is beginning to impact other human workflow inside the holding company.

"Obviously, it’s going to do some streamlining of processes," he said, noting: "We’re already testing taking all of our [manually processed] invoices and reducing processing costs from $2 or $3 down to 20 cents or 30 cents each.

He cited the use of AI in the creation of storyboards and presentations, as well as "a lot of internal work" as further areas of AI cost-savings.

He also predicted AI is poised to be a boom for Madison Avenue overall that would reaccelerate "digital transformation" projects that slowed down as a result of big tech company layoffs during the first half of the year.

“I don’t think people have fully realized that generative AI means a rewriting of almost all customer interfaces," Penn said, adding: "It’s an entirely new-and-improved way to converse and kind of take action on behalf of consumers… to get them what they want to see when they want to see it. And I don’t think we’ve even scratched the surface of that."

Penn said AI is beginning to impact Stagwell's considerable research and polling operations by creating more efficiency for automating research processes and reducing the amount of labor necessary for analysts to generate insights.

He cited AI's role in "focus groups," "open-ended" research surveys, "even data tables," as key areas of AI research innovation.

"And we're going to sell that to the marketplace," he told investors and analysts.

In terms of Stagwell's considerable advocacy and political advertising operations, Penn said it's too early to predict how much and when political ad spending will begin to surge again, but he predicted 2024 will be the biggest political ad spending year ever.

“There were a lot of fund-raising slowdowns last season through this, but what we’re really seeing is that things are tracking on the advocacy side somewhat ahead of what they were," Penn told analysts, adding, "I think we’re all going to see what happens here in late August, You know, will there be a real primary. Will this thing explode with the first primary debate? I think that’s the event that we’ve got to kind of watch in a couple of weeks.

"Once this does get going – whether it gets going toward the end of this year or the beginning of next – I don’t think there’s any question that it will be the biggest election season in history."