Arthur Sadoun: Our creative agencies are ‘essential’ despite ‘low single-digit’ growth

—Publicis CEO on the company’s strong start to the year; returning to Cannes for the first time in four years; and the response to his Working with Cancer initiative—

By Gideon Spanier

Creative agencies remain “essential” to Publicis Groupe’s offer, even though they are growing only “low single-digit” while other parts of the business are growing faster, Arthur Sadoun has told Campaign.

The chief executive of Publicis rejected the suggestion that slow-growing creative was “a drag” on the overall business, which grew 7.1%, with media up “double-digit”, in Q2.

He conceded that creative is “not accretive to growth,” meaning it is not going to drive faster growth for Publicis, but it is still key because clients need to “connect data with creativity, media and technology”.

Publicis’ creative agencies include Leo Burnett, Saatchi & Saatchi, and Bartle Bogle Hegarty. Rivals such as WPP and Dentsu have also reported previously that creative has grown more slowly than other disciplines such as media.

Sadoun, who has experience of leading a creative agency as a former boss of TBWA\Paris, also spoke to Campaign about why artificial intelligence is an opportunity for Publicis and how the company is giving an average salary increase of 4% to staff in 2023.

Publicis had a strong start to 2023 and outperformed its main rivals in Q1. How would you describe Q2 and what can you tell us about the rest of 2023?

We continue to outperform the market on organic growth thanks to our unique revenue mix and new-business track record, with 7.1% ahead of expectations after double-digit growth in 2022. We [expect to] deliver the best financial KPIs in the industry in H1 [after other rivals report their Q2 results over the coming weeks].

In this first half, thanks to our platform organization, we are demonstrating our resilience to business cycles at a time when there are still macro-economic uncertainties, by upgrading our guidance on all KPIs for the full year [with a forecast of 5% annual organic growth].

The creative side of Publicis grew only low single-digit when the group is growing 7%, following a similar pattern last year. Is it fair to describe the creative agencies as a drag on the overall growth of the business? Maybe it’s a drag for everybody across the industry?

I wouldn’t call it a drag. In the industry, creative is today not accretive to growth but in our case, we consider that creative is still essential to our own growth. The reason why we are outperforming the market today is because we are able to connect data with creativity, media and technology in a unique way. So, creativity is still at the centre of our business model. It is today backed by data and powered by technology to deliver breakthrough ideas that can be personalised in a very fragmented media landscape. A great example of that is our Grand Prix in Cannes with Renault on Plug-Inn – a brilliant creative idea from Publicis Conseil brought to life by our cutting-edge capabilities.

Maybe you should have bought Uncommon Creative Studio, the six-year-old UK creative shop, which your French rival Havas acquired last week?

When you have BBH, when you have Leo Burnett, the [Campaign UK] Agency of the Year, and when you have Saatchi & Saatchi, which has just won John Lewis, the least you can say is you have enough great creative agencies in the UK.

Pfizer completed a major global agency consolidation in Q2, with Publicis taking the lead on media, data, tech and production duties (and Interpublic becoming lead creative agency partner). How important was the Pfizer review? And was there any wider significance in terms of what large clients want and Power of One-type integrations?

We don’t comment on any specific win any more. Generally speaking, what I can tell you is that our large clients want to accelerate their transformation to continue to grow, while reducing their costs. This is pretty simplistic, but also really difficult to achieve in a highly fragmented media landscape. They need one data spine, a single media platform, and a creative-fuelled production engine. And all of that boosted by a compliant AI solution. With [data unit] Epsilon powering creative and media through personalisation at scale, and [consulting arm] Sapient, we are uniquely positioned to deliver exactly this, as is demonstrated in our new-business track record.

At your annual general meeting in May, you told shareholders that artificial intelligence is “clearly an opportunity for us,” but Maurice Lévy, the chairman of the supervisory board, also pointed out separately that another hot trend, the metaverse, has not been widely adopted so far. Why is AI an opportunity and how soon is it going to change things for Publicis and beyond?

First of all, you should know that my chairman is always right: the metaverse has not been widely adopted so far. But nevertheless, no one should underestimate the power of Web3 in the future. Thanks to our transformation, we are uniquely positioned to lead the future of our industry, which will inevitably be shaped by data, tech and AI.

AI is the flavour of the day, and thanks to Chat GPT’s great launch, everyone has [now] discovered its potential. Not at Publicis – we have been very early adopters. With our €9 billion investment in cutting-edge technologies [such as Sapient and Epsilon] in recent years, we have an unmatched advantage to make sure that our clients and our people can truly leverage AI to grow today, in all of our disciplines and internal processes.

Working with Cancer has been a personal mission for you since the launch in January and it won a Grand Prix at Cannes Lions. Now Publicis and four of your main competitors, Edelman, IPG, Omnicom and WPP, are asking agency creatives to support the next stage of the campaign. What more do you want companies and people to do?

Erasing the stigma of cancer in the workplace has definitely become a personal mission for me. Since we launched, more than 700 companies have signed our pledge to build a more open, supportive and recovery-forward workplace environment. Our first global campaign, supported by $100m media investment, had a real impact on many people’s lives. But we know this is just the beginning.

I was very touched that Richard [Edelman], Philippe [Krakowsky], John [Wren] and Mark [Read] immediately accepted to support the next step of this initiative and grateful to the Cannes Lions festival for organising The Big C” brief. What I am expecting now is more companies to join and as much creative talent as possible to participate in this one-of-a-kind creative challenge to create the next Working with Cancer campaign, set to launch around World Cancer Day 2024.

You attended Cannes Lions for the first time since 2019, after dealing with cancer last year, and Publicis previously withdrew from the awards in 2018 because you felt the festival had got too big. How did you rate Cannes Lions 2023? What are your thoughts about its future?
The press loves to say we didn’t go to Cannes in 2018 because the festival was too big. But this is wrong. We didn’t go to Cannes simply because we needed the money to launch our industry-first AI platform, Marcel, and revolutionise the way our talent interact, learn and grow within our company. At the time we were mocked for thinking AI could play a role in the creative industry. It was definitely interesting to see AI being the hot topic on the Croisette this time around.

When it comes to Cannes this year, it was very busy, but pretty successful as we ended up being the number one holding company in Europe, the second best agency in the world with Publicis Conseil [behind GUT Buenos Aires], and won a couple of Grands Prix on big clients with big investments.

Publicis gave staff an average pay increase of 8% last year and inflation is continuing to rise in many markets. What pay increases are you planning in 2023 and how do you balance reward with keeping your costs under control?

We have shifted from a holding company to a platform in recent years. By erasing the P&L silos, putting in place a global delivery model and accelerating on Marcel, we are today able to deliver the best financial KPIs of the industry, while rewarding our people better than competition and absorbing wage inflation.

Last year, we raised our salaries on average by 8% and increased our bonus pool by 20%, reaching record-high levels while our competition was actually decreasing theirs. This year, we have already increased our salaries by 4% and plan to keep the same amount of variable remuneration. In the past 18 months, 80% of our people have seen their salary increase and all of them have received a bonus in 2022.

At your annual general meeting, it was striking to hear Maurice Lévy talk about the importance of international expertise on the supervisory board because almost 95% of your revenue comes from abroad. We know Publicis is proud of its French roots but, in some ways, it is an American company with close to 60% of turnover in the US. Why not move your main listing to New York, attract US investors and get a higher re-rating?

Yes, we are proud of our French roots and the journey we have enjoyed in our 97 years since the creation of Publicis by Marcel Bleustein-Blanchet. Publicis has been built step by step and piece after piece, by incredibly great teams, under the leadership of only three CEOs — the founder, Maurice Lévy and myself. It’s not only a question of [stock price and earnings] multiples, but history, culture, people, clients, creativity, innovation and bold moves. You don’t trade that for a multiple point.

This time a year ago, you marked five years as CEO and we asked you what Publicis would be like in five years’ time. You responded that we should wait until shareholders renewed your mandate, which they subsequently did, and, more recently, they approved a special five-year “retention contract” to keep you in the job. You also have said several times that Publicis’ transformation is “complete.” So now seems a good time to ask again: what will Publicis look like in 2027?
What you’re asking me to do is predict the future which is a gamble, a trap, but also I know, a part of the job. People may think we’ve been lucky by making the right bets with Sapient for tech, Epsilon for data and Marcel for AI. But it’s not luck. It’s a commitment to people, clients’ businesses and ideas.

When I say our transformation is complete, yes, it’s because of our assets, but more so because we have an integrated 100,000-strong workforce, trained, skilled, expert at change and transformation. So all I can say about 2027 is that we are ready.

This article originally appeared at Campaign UK.