Publicis Groupe plans to increase salaries by about 4% globally in 2022 to help employees to cope with the rising cost of living, while the jobs churn across the agency sector “has slowed down a bit” after the upheaval of "The Great Resignation” in 2021.
That’s according to Arthur Sadoun, the chief executive and chairman of Publicis Groupe, who gave a “confident” but measured assessment of the year so far in a video interview with Campaign from his office in Paris at its Q1 results.
Organic revenues rose a better than expected 10.5% in the first three months of the year but Sadoun is sticking with his previous forecast for growth of between 4% and 5% for the full year because there is “too much uncertainty”.
Factors include Russia’s invasion of Ukraine, rapidly rising inflation and the continued impact of the pandemic.
Analysts at Citigroup said: “A degree of conservatism makes sense [rather than Publicis Groupe upgrading its growth forecasts] given significant macro-uncertainty.”
Sadoun, who has been CEO of the 87,000-strong French agency group since 2017, also talked about “a tough couple of weeks” after he was diagnosed with a cancerous tumour in his neck and had it removed. He is now recuperating.
Campaign: A lot has happened in the world since Publicis Groupe reported its Q4 2021 results on 3 February. Russia invaded Ukraine, inflation has risen further and stock markets have fallen. How much did all of that affect your Q1 performance and your outlook for the rest of 2022?
Sadoun: Despite this very challenging context, we had a great start to the year financially and commercially. All of our regions performed well, and we delivered 10.5% [organic] growth in Q1 when the market was expecting us at 6.3%. Once again, we are proving our ability to capture the shift in client spend towards first-party data management, dynamic content, digital media and commerce.
This is particularly true in business transformation, where [consulting arm] Publicis Sapient saw strong acceleration this quarter at 18.5%, confirming our clients’ imperative to build their own direct-to-consumer experiences. This momentum should continue in Q2 and makes us confident of delivering on the upper end of the targets we set at the beginning of the year.
The cost of living has become a major issue in many parts of the world. In February, you announced a “bonus for everyone” who had worked at the company for the past two years. But what are you doing about salary increases for staff in 2022? One of your peers (WPP) has talked about giving an average salary increase of 4%.
We believe in rewarding the many, not just the few. This is why we were the only holding company to reimburse every salary sacrifice made in 2020, as we performed way better than expected, and are giving a bonus to everyone in 2021, as we had a very good year.
When it comes to 2022, we will definitely see some salary increases and on average, we are around 4% too. But this number alone isn’t very telling, we also believe in rewarding right. What counts is making sure we can respond effectively to local inflation impact, which varies greatly from one market to another. Our country-led model is helping a lot on that front.
Have you seen any evidence that the amount of employee churn and people moving jobs has slowed down in 2022 or is it similar to 2021?
It has slowed down a bit, but talent retention is still one of the major challenges for our industry. We know and accept that the world of work has changed. That is why we are actively redesigning our employee experience with flexibility, wellness and enrichment in mind.
The latest example of that is Work Your World [a global flexible working policy]. We already have thousands of people who are planning to spend six weeks working from a new location [away from their main office location] this year.
Publicis Media has had a strong new-business record, including McDonald’s in the US, LVMH in the UK and France and PepsiCo in China this year. Why has Publicis Media been performing well? And will you disclose the exact growth percentage, as WPP and Dentsu have started doing at a global level?
We also disclose growth percentage, by expertise and by countries. To give you one example, thanks to the dynamic you mentioned, Media is growing double digits in the US this quarter.
For us, we look at new-business records holistically – what we have won, what we have retained, what we have accomplished working as the Power of One. Once again, Publicis Groupe has topped all the new-business rankings [for JPMorgan, COMvergence and Recma] in 2021, which is the third time in four years.
What we have not lost is just as important because retaining clients is the truest expression of the strength of your model. When you start to look at that, 2020 and 2021 are pretty telling for the industry.
You made an interesting comment at the Q4 results when you told investors that “it becomes more difficult every day to separate creative from media”. Can you explain further what that means – for example, is that translating into more client assignments?
I have been going easy on investors actually. I don’t think it is going to be more difficult – to be honest, it’s just “effective marketing” in today’s platform world – where data, creative, media and tech intertwine seamlessly. That is the only way to deliver creative, personalised, omnichannel experiences at scale. This is exactly what our clients need, to continue to grow while reducing their costs.
How big an opportunity is retail media? When you bought CitrusAd, a specialist company, last year, you talked about “exponential growth” and how retail media is “expected to exceed media investments in traditional television” by 2025. How much is this about clients reallocating their media budgets? Or is it new money coming from other budgets?
For sure, by 2025 our CPG [consumer packaged goods] clients are expected to spend more advertising on retail media than on linear TV in the US. Retail media is already outpacing the spend on YouTube [in terms of ad sales] and Netflix [in terms of subscription revenue].
This is going to be a massive shift, that is well expressed in the growth of CitrusAd, above 100%. Clients will reallocate budget from their traditional media spend or from promotions, but the market also currently expects at least 30% of growth to come from net new investment, as it will definitely be a very powerful tool for growth.
With retail media, brands can get direct access to customers at the point of purchase, providing invaluable data and measurement, opening a new era in their partnerships with retailers and marketplaces.
Publicis Groupe said on 15 March that it was pulling out of Russia and passing ownership of its agencies to local management, with immediate effect. You have also reported an €87 million one-off loss from the disposal of the business at these results. Can you give us an update on how your exit from Russia is progressing?
Our exit from Russia is complete. In this instance, it was important for us to take an approach that was people-first, not PR-first. That is why we took the necessary time to find a solution to secure a future for our 1,200 Russian employees, while taking strong actions that fully respond to the gravity of the current situation.
What about some of Publicis Groupe’s global clients that continue to operate and advertise in Russia? Are they still using the former Publicis operation that is now under local management? Have you tried to persuade these clients to exit Russia?
We fully condemn the Russian state’s unilateral aggression against Ukraine, and none of our clients need our encouragement to take the right moral steps in this situation. That said, depending on the nature of their business, for many, the process of reviewing, suspending or stopping their activities takes time.
There is a lot of talk about how Russia’s invasion of Ukraine means globalisation has changed fundamentally and we are moving to a multi-polar world with greater trade barriers. Generally, free trade has been good for global advertising. How worried should the global ad industry be? Will this mean lower global growth for the sector in the medium term?
If the last two years have taught us anything, between a pandemic no-one saw coming, and a war no-one predicted, it’s that we should be very careful in trying to make definitive statements about the future. All we can do is prepare our people to have the skills and the will to embrace change and the past years have shown that they are ready for whatever the future holds.
France is electing a President on 24 April. As a French company, what is Publicis Groupe’s view about Emmanuel Macron versus Marine Le Pen? Do you have any hopes or concerns?
It is a very important moment for the nation and I am not going to speculate on the future result of this election.
You recently told staff that you have been treated for a cancerous tumour in your neck and will stay in Paris until June. We wish you well. How is your treatment going and do you plan to do things differently as CEO in future?
Thank you, it’s good to be back to the office and back to normal after a tough couple of weeks. I’ll be travelling in the coming days and then, as you say, staying in Paris until June. I think that is enough of a change for now.