Earlier this month Publicis Groupe CEO Arthur Sadoun announced a controversial return-to-office (RTO) plan that’ll go into effect on January 1. It requires Publicis employees work in the office three days a week, and be present every Monday. Regardless of other agencies’ plans, Sadoun believes in-office work will be crucial to capturing more market share next year.
For its third quarter, Sadoun’s holding company reported better-than-expected financial results. Its 5.3% growth and $3.44 billion organic revenue are relatively positive considering the economic tailwinds slowing advertising growth overall. The RTO mandate is one piece of a two-pronged strategic approach. The other is a significant emphasis on emerging technology and AI.
It’s not surprising, considering Publicis Groupe’s media and technology business units drove a majority of its revenue this quarter.
“Making sure that we AI-ify our organization better than the competition is important, but bringing people [back] together is the other component that we think is critical,” Sadoun told Adweek.
Encouraging results, despite the tailwinds
Publicis’ financial results outperformed the broader market, albeit marginally. Last month, economist Brian Wieser estimated the advertising industry would grow by 5% in 2023, just short of Publicis’ performance between July and September. Analysts considered single-digit percentage growth average before the pandemic catalyzed a few unusually high-growth years.
Slower growth in the U.S. market is offsetting better year-over-year results in global markets. This quarter, perhaps reflecting the current economic environment, the agency’s U.S. business grew just 3.2% compared to the 11.1% growth it achieved during the same period last year. But, the slower growth still surpassed expectations given a somewhat recessed business economy and its impact on advertising investments. Plus, growth in the U.S. market is tougher to achieve given Publicis’ large presence there.
By contrast, the agency experienced 10.7% growth in Europe–nearly equal to the 11.1% it achieved in the region during the same period last year. Growth in Asia-Pacific was 3.8%, closely tailing the prior year’s 4.1%.
Encouraged by its overall performance, Publicis updated its guidance, or growth expectations, from 5.5% to 6% for the 2023 fiscal year.
“No one is expecting in the difficult conditions that we are going through as an industry (and the world, by the way,) that we’re in a position to upgrade our guidance,” Sadoun told Adweek. “This is a demonstration that our model is pretty different from [the] competition,” he added.
Media and technology categories prop up revenue
Publicis attributes its third-quarter revenue primarily to media billings; creative services; and its technology assets like Publicis.Sapient and Epsilon. Each category drives one third of the larger business, with Publicis.Sapient growing 1.2% and Epsilon growing 10.5% during the three month period. These technology and data-focused business units contribute significantly to the bottom line, explaining why Sadoun’s eager to emphasize a technology-oriented strategy.
“What we know is that we have built a model that is resilient to the business cycle,” Sadoun said. “The platform organization that we have put in place allows us to preserve a margin…to preserve our people. It’s as simple as that,” he said.
