Holding company leaders are facing a "line-in-the-sand" moment between short-term and long-term growth, Arthur Sadoun, CEO/Chairman, Publicis Groupe told MediaPost today.
He was responding to comments Wednesday by Omnicom CEO John Wren, who laid out Omnicom's reasons for avoiding multibillion-dollar data provider deals like Publicis Groupe’s recent acquisition of Epsilon and IPG’s purchase of Acxiom Marketing Solutions.
Sadoun equates the transformational shift toward data to advertising's earlier move away from print and radio to TV. "We live in a digital-first world. There are 900 digital interactions before someone buys a car," he says. Clients need to own first-party data in order to compete, believing the best strategy is to acquire outside data providers rather than attempt to build them in-house.
Sadoun said he agrees "one hundred percent" with Wren that this evolution doesn't change creative strategy, but modern creativity is enabled by technology and fueled by data.
Sadoun says his responsibility to shareholders is to "keep my word and deliver on what I am saying." The Groupe's H1 2019 financials reflect his earlier statements, he says. “We recorded a sequential improvement in Q2 versus Q1, with organic growth returning to positive territory.”
“When it comes to our short-term organic growth, two phenomena explain our situation,” he says. “On the one hand, our clients are suffering from various pressures leading to budget cuts and fee reductions in sectors where we have a disproportionate share of market.”
This is particularly true in the U.S,. where the Groupe is heavily exposed, he said. "Clients don't cut activation, they cut the upper end of the funnel" -- particularly CPG clients, he adds.
At the same time, “the profound transformation we have been engaged in has penalized us in the short term.” He points out the Groupe has spent 150 million euros on new talent in the past 18 months, a lot of expense that is the right strategy for the long term.
Although the Groupe will incorporate Epsilon's profits beginning July 1, 2019, the data unit’s gross revenues won't be felt until July 1, 2020.
The Epsilon integration is "so far so good," he says. Sadoun travels to the U.S. three times a month, with focus on the integration, which includes 25 dedicated teams — ranging from high-end strategic to client specific — all working "tirelessly" with one very clear objective in mind and that is to accelerate growth.
While Sadoun says the Groupe's “Power of One” strategy has been extremely beneficial in the Groupe's growth outside of the U.S., Epsilon was the necessary game-changer in order to implement last week's reorganization of its U.S. leadership team. “We were missing the scale of data,” he explains. "We needed all of the ingredients to have true transformation."
More than 50% of the Groupe's revenue comes from the U.S.