Arthur Sadoun has claimed Publicis Groupe has “strong fundamentals” as it performed better than expected during the coronavirus slump, particularly in North America, although organic revenue still fell 13% in the second quarter.
Revenues across the first six months of the year dropped 8%, and Sadoun, chief executive of Publicis Groupe, warned it was “premature” to say whether the second half of 2020 would be better or worse.
“Nobody knows what shape recovery might take,” Sadoun told Campaign in an interview.
“So-called experts” have predicted all kinds of “recovery shapes from a V to U to a swoosh to a reverse square root all in the same quarter”, Sadoun said, in a veiled swipe at Sir Martin Sorrell, executive chairman of S4 Capital, who has made several such predictions.
Publicis Groupe cut its cost base by 6.4% in the first half of the year as it made redundancies – Sadoun declined to specify the number of staff affected – and introduced temporary salary cuts of up to 20% for higher-earning executives.
Sadoun, who has reduced his own pay by 30% during Q2 and Q3, said country managers have the freedom to decide when to end the salary cuts “locally”.
He acknowledged that some analysts, including Credit Suisse, are downbeat about the long-term prospects of agency groups in the face of new entrants and he would love to prove the doubters “wrong”.
Campaign: Q2 has been brutal and you warned in a video message to staff earlier this month that “very tough days” lie ahead. What, in particular, is “very tough”? Are there certain disciplines and client categories that are suffering?
Yes, Q2 has been brutal for our industry. But when it comes to Publicis, our strong dynamic in the US, our robust financials and our continued new-business momentum have helped us contain the full impact of the crisis and even outperform advertising industry estimates.
Given that this is an unprecedented intersection of health, economic and social crises, the “very tough” part is the natural human response to uncertainty. This is true both for our people and our clients. I feel for them and for us, because the psychological strain of planning for a multitude of scenarios, being responsive and agile and knowing that this will continue many more months, that is very tough.
As resilient, ingenious and courageous as we all are, we are still human.
How do you see Q3 and Q4 playing out? Is there evidence for a rapid, V-shaped recovery in certain markets – for example in Asia? And how much do you worry about a delayed recovery in other countries such as the US because of a resurgence in Covid-19?
We will all have to live with the virus for a while, and its economic and social consequences will continue to hit our industry in the second part of the year and probably beyond. The level of uncertainty is such that nobody knows what shape recovery might take. I have seen many so-called experts predict recovery shapes from a V to U to a swoosh to a reverse square root all in the same quarter…
But, on a more serious note, of course I worry about the delayed recovery, including in Asia, but I’m confident that we have taken, and will continue to take, all the measures to protect our people and our agencies.
You told Campaign in April that this crisis is “unparalleled” and the IPA Bellwether Report in the UK recently warned it could take until 2024 for marketing budgets to return to “normal”. How long do you think the “very tough” days will last? Until the end of 2020? 2021? Or longer?
The crisis is unparalleled in its magnitude, complexity and, probably, its length. There is too much uncertainty to make any forecast at this stage.
What are clients asking for since the crisis? Do you see changes in terms of demand for integration (Power of One), data (Epsilon) and digital transformation? Or are trends broadly similar to pre-Covid?
What our clients are asking for is the same as pre-crisis. However, now there is an urgency. Consumers have caught up with the digital-first world, so the crisis has highlighted the need for first-party data, breakthrough creativity, digital-first media and technology.
Today, clients can no longer delay the need to own and protect their data nor avoid marketing and digital business transformation; the crisis has accelerated the inevitable.
Publicis Groupe re-opened some offices in July. Can you give us an update on how that is going in key markets and what have you learned? What percentage of your staff are now back in the office and what do you expect by January 2021 and July 2021? How will new workplace culture be different in terms of time spent in the office versus the home?
The virus is still circulating in many places. Our first priority remains the health and safety of our people and their families. We have opened one office per city for employees that need it. Each market is at a different stage in their re-opening and the return to the office is not one size fits all. We have made it clear that employees can continue working from home through to the end of the year if their personal situation requires it, and in many countries we are still really encouraging people to stay home.
When we ran a global survey a few months ago, 75% of our talent said that they want to work differently, 89% want to work from home more often, so we will definitely adapt our way of working. As always, we will first listen and learn.
Publicis Groupe had 83,235 employees at the end of 2019. How many jobs has Publicis Groupe cut since the crisis and what is your total headcount now? Do you still have a hiring freeze in place and when do you expect to start recruiting again?
We will see where we stand in terms of number of employees at the end of the year, but clearly our priority is to save as many jobs as possible. Since the crisis began, we took only one decision at Groupe level, which is to ask everyone not to go outside for third-party resources, freelancing and new hires. The rest of the measures have been taken locally by each agency depending on their local sensitivities.
We have put in place platforms, like Marcel, that have helped us manage resources in the best way possible. To give you an example, in a remote world, there’s no reason someone who has expertise in a category but is based in an agency experiencing revenue decline in one city can’t work for a client based in another city where there is need. This is what we have solved with Marcel and it has actually enabled us to save jobs.
You and other senior executives from Publicis Groupe have taken salary reductions during Q2 and Q3. But is it difficult for your top talent if WPP has ended its reductions after only three months? Is there anything that would make you revise your decision – for example, end some pay reductions early or even extend them beyond September? Or are there other ways to incentivise your staff?
We remain resolute in our focus on saving as many jobs as possible during this very challenging time. I’m proud that, in our case, our leaders took salary reductions on an individual and personal basis to protect their people. This has been dealt with at a market level, not at Groupe level, with reductions varying in time and amount depending on the business and country situation. And, similarly, the decision to lift the reductions will be taken locally by these same leaders. I trust them to do the right thing.
What gives you hope? What are some of the positives – both in terms of what you see from clients and what you see from Publicis Groupe?
What gives me hope is that what we designed with the teams three years ago is being realised and becoming a necessity across all of our clients. This crisis will accelerate everyone’s strategy. By investing in a new model that connects data, creative, media and technology to deliver personalisation at scale, we can bring our clients what they need in this new world.
Shifting from a holding company to a platform with initiatives like our country model and Marcel has given us the ability to work remotely, made us more agile and maximised everyone’s potential to save as many jobs as possible. As a result, I am very confident that we have the strong fundamentals to weather this crisis and be recovery-ready.
How would you describe the outlook for new-business activity – subdued or busy? How do you enjoy virtual pitching and how much do you think it will replace face-to-face in a future, post-Covid environment?
The pitch season has started for sure. I actually don’t enjoy virtual pitching. Even if I believe that creativity, data and technology are at the core of strategy, this is still a people business and you need to see what you buy.
Credit Suisse recently published a long note that warned all of the big agency groups face “below-average”, long-term growth of just 1% in a post-Covid world because clients are in-housing and turning to new entrants such as consulting firms for digital transformation. Can you prove Credit Suisse wrong? Or is Credit Suisse right and Publicis Groupe has to take share from rivals to grow faster?
Nothing would make me happier than to prove Credit Suisse wrong, but it’s true that the market is transforming very fast with new competitors, new media landscapes and new client behaviour. You can take that as a risk. We take it as an opportunity. This is why we went through a profound transformation, including the acquisition of Sapient and Epsilon. The market we, Publicis, operate in is broader than that of our direct competitors. It does include consulting, technology and data, and is growing faster than advertising.
Of course, we still have a lot to prove, but being ranked number one in new business two years in a row and demonstrating that we were off to a good year in 2020 is a good sign for the future.
Credit Suisse singled out “client fee pressure on creative” as a major negative. How much is creative still under pressure? And, as someone who has previously run creative agencies, what do you think the creative agency of the future should look like?
All agencies in every discipline should be creative, not only the communication agencies. We should cultivate creativity in media, in data, in technology. And I believe that creativity will still be the ultimate differentiator for a long time, even more so in a world where our clients will have to justify the premiums of their products and services.
Are you satisfied that Facebook and other social-media platforms are doing enough to make their platforms safe for users and your clients? Do you believe the current advertising boycott has achieved anything meaningful and do you expect it will continue after July?
I won’t answer for my clients when it comes to the boycott. But the fact is that the walled gardens must evolve towards more social responsibility, integrity, transparency, and fight against racism and discrimination in service of humanity.
Leadership in a recession is tough. How are you coping? You do appear to have a good relationship with your predecessor, Maurice Lévy, judging by your joint video for Publicis Groupe’s internal Cannes-Do Awards in June. What has Maurice’s advice been at this time?
What is tough is the position of many employees in this industry that are worrying for their jobs. Our role as leaders is to do everything we can to protect them. This is what Maurice Lévy, as the chairman of the board, and I are doing. Sometimes we are also trying to put a smile on their faces. Maurice gives me many advices [as Sadoun likes to put it], but I will keep them for me as it is competitive advantage.