Category: Insights

As the global ad industry adjusts to there now being five global advertising holding companies instead of six, Green Square’s Barry Dudley asks what the absence of words such as ‘advertising,’ ‘creative,’ and ‘strategy’ might tell us about where Omnicom is heading. Although there have been all sorts of rumblings and rumors for some time, Omnicom is actually going to acquire IPG – subject to regulatory approval. It is a ‘stock-for-stock’ transaction, meaning that IPG shareholders will sell their shares in exchange for shares in Omnicom. So, despite lots of heady numbers, no cash is changing hands. As the joint press release states: “Interpublic shareholders will receive 0.344 Omnicom shares for each share of Interpublic common stock they own.” Based on Omnicom’s share price at its last close ($103.43) this equates to $35.58 per share. IPG’s share price at its previous close was $29.26, so there has been a fairly hefty premium offered. The release went on to say: “Following the close of the transaction, Omnicom shareholders will own 60.6% of the combined company and Interpublic shareholders will own 39.4%, on a fully diluted basis.” This shows the relative sizes of the businesses. What did the markets think? Not unsurprisingly, IPG’s share price has jumped – initially to $32.90 and then settling back to $30.30 by the end of the day’s trading. Conversely, Omnicom’s shares closed the day down 10.25% at $92.82, taking around $2bn off its value. Is that because the market thinks Omnicom is overpaying, or it just doesn’t think it is a smart deal? Here’s what the respective CEOs had to say… “This strategic acquisition creates significant value for both sets of shareholders by combining world-class, highly complementary data and technology platforms enabling new offerings to better serve our clients and drive growth,” said Omnicom’s John Wren. “Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change. Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes. We are excited to welcome Philippe and the entire Interpublic team to the Omnicom family.” His Interpublic counterpart Philippe Krakowsky put it like this: “This combination represents a tremendous strategic opportunity for our stakeholders, amplifying our investments in platform capabilities and talent as part of a more expansive network. Our two companies have highly complementary offerings, geographic presence and cultures. We also share a foundational belief in the power of ideas, enabled by technology and data. By joining Omnicom, we are creating a uniquely comprehensive portfolio of services that will make us the most powerful marketing and sales partner in a world that’s changing at speed. We look forward to working with John and the entire Omnicom team.” Picking out a few words and phrases – “highly complementary data and technology platforms,” “new technologies, data-driven outcomes,” “platform capabilities,” and “enabled by technology and data” – it’s pretty clear where they are planning to take the combined business, although I was quite surprised not to see a single reference to AI. Without doubt IPG’s Acxiom (Audience Solutions, Data and Decision Sciences) and Omnicom’s Flywheel Digital (Digital Commerce) are going to be central. While Flywheel is a relatively recent acquisition for Omnicom (2023), IPG acquired Acxiom in 2018 so it has been embedded into the group: “IPG’s OPEN architecture approach flexes to what brands need, bringing our wide capabilities across over 74 agencies with Acxiom’s Customer Intelligence Cloud capabilities to help brands and people, win.” And then a few words that are conspicuous by their absence: advertising, creative, strategy. There was mention of “innovation” and the “power of ideas,” but the bedrock brands that have stood front and center of these groups for many years appear to be heading to the back seats –BBDO, FCB, McCann, MullenLowe, TBWA et al. There were a good few mentions of the “talent”. IPG’s website claims ‘approximately 55,000 employees’ and Omnicom has ‘70k+ people’. By my maths that’s 125,000 in total. According to the press release, the ‘new Omnicom will have over 100,000 expert practitioners’. There’s quite a difference between these two numbers, which will be partly explained by non-practitioners, the back office. But the ‘annual cost synergies of $750m’ will undoubtedly involve a significant proportion relating to headcount reduction. That’s a pretty unpleasant thing to have surrounding you at this time of year. And where will the clients end up in all of this? They will undoubtedly have more tools, platforms and data to play with, but I can’t help thinking that client service is going to suffer. So as the mega groups morph towards wannabe Metas and Amazons, the opportunity for smaller players to emerge and capture the ear and the wallet of clients is going to grow, with a wave of people stepping away (or being jettisoned). I also expect to see some exciting startups emerge. My colleague Tony Walford wrote just a few days ago about Publicis becoming the biggest marketing services group by revenue. I wonder what Sadoun and Snoop Dogg have up their sleeves as their next move… WPP maybe? Read more

Publicis ends 2024 on a high as it becomes the largest holding company in the world for the first time in its history. Green Square’s Tony Walford analyzes why 2024 has been fantastique for Arthur Sadoun and his team. Every year Publicis’ inimitable CEO Arthur Sadoun puts out a pre-Christmas short film to all staff thanking them for their global contribution called the “Wishes”. It’s quite something, and 2023 saw each of its 100,000 staff being sent a personal video created in AI with Arthur featuring his digital twin. Yesterday saw the release of the 2024 “Wishes” in which Snoop Dogg, or “Le Snoop” as he rebrands himself in the piece, announces Publicis as global Top Dog. The end of this year is very likely to see Publicis as the largest agency network in the world, with its €13.9bn revenue forecast edging ahead of WPP, which has worn the global revenue crown for the last couple of decades. The film is very amusing. The French love Snoop, so this is a smart choice particularly on the back of the Olympics, and features Sadoun unsuccessfully trying to do the C-Walk, ending with a cameo of former CEO and industry legend, Maurice Levy, on a balcony showing everyone how it should actually be done. Sadoun is a very charismatic leader, as was Levy before him, and his enthusiasm is always a joy to watch (even in boring old investor presentations). But putting that aside, how did Publicis achieve this lofty height historically dominated by WPP for so long? The first thing that sprung to mind was a piece I wrote in a coffee bar in Amsterdam back in 2018 (the morning after giving an evening M&A seminar for The Drum) about how Publicis was leading the charge by simplifying its offer around the “Power of One”. It’s funny how specific moments and places in time trigger a memory and, given where I wrote it (which was after a very late night with The Drum team), I was a bit worried how it would read when I went back to it today! It finishes with the line “Power of One seems to be not just another vacuous corporate restructuring exercise, rather a genuine attempt to create a new model that will see the whole group face its clients in a very different way going forward”. Fast-forward six years (me with a lot less hair, but Arthur only shifting from black to grey), and it’s clear this focus has paid enormous dividends. Don’t get me wrong; all the networks have embraced the need to change how they operate, with Mark Read at WPP being particularly voracious in merging the biggest agencies in that group, but Publicis was at the forefront of this paradigm shift. However, it’s one thing to talk about the Power of One, and another to deliver it. And is this why revenues have grown so much? M&A has actually played a major part, with Publicis making several very large strategic acquisitions to strengthen its position in key areas. A significant moment was the $4.4bn acquisition of Epsilon in 2019, bringing the group valuable consumer data and AI capabilities which have become a fundamental part of Publicis’s offer. This sizable deal followed its bold $3.7bn acquisition of Sapient in 2015, which it merged with Razorfish (remember that?), to create Publicis Sapient and kickstart Levy and Sadoun’s “Power of One” strategy. While this year has been relatively quiet for holding company M&A, with PE-backed outfits and the challenger group Stagwell being more active, 2024 saw Publicis make two further significant moves. The first was its acquisition of Influential, the largest global influencer marketing company by revenue, giving it access to over 3 million creators and 90% of global influencers with more than 1 million followers. Publicis immediately started integrating its own data with Influential’s platform to offer more targeted and effective influencer marketing solutions with its press release stating “By combining our Epsilon data, which allow us to see 2.3 billion people around the world, with connected TV, commerce, and now creators, we can enable our clients to truly know and understand their customers and prospects, and engage with them on a one-to-one basis, wherever they are, both online and offline”. The second was the acquisition of Mars United, the world’s biggest independent commerce marketing agency. Retail media is currently one of the hottest areas in marketing, with Next15 lauding its retail specialist SMG (which I’m proud to say was a Green Square deal), as a bit of a savior in what has otherwise been a very difficult year for that group (but that’s another story). Publicis’s acquisition of Mars in September completed the holy trinity of data, targeting and effective retail media deployment for Publicis, and further cemented the Power of One philosophy. From the press release: “The combined forces of Publicis Groupe and Mars will allow clients to influence the complete commerce journey for billions of global Shoppers, through an offering that begins with the industry’s deepest and richest database of consumer & shopper behavior and ends at the digital and physical shelves of the world’s leading online and offline retailers.” Thus, Publicis’ rise to become the world’s biggest agency group by revenue has not been entirely organic but facilitated by some very substantial acquisitions. That said, Publicis has not engaged in acquisitions simply for the sake of size, it only made a handful in 2024, and they were smart. Sadoun has absolutely stuck to his strategy of bringing a single point of focus for all Publicis’ clients’ needs and, given Influential and Mars only happened in the second half of this year, their further integration in 2025 should bring the group even more global blue-chip client opportunities. This is the first time a French agency group will be the world’s largest. France is currently suffering significant economic and political turmoil, and I wouldn’t be surprised if Emmanuel Macron hasn’t already called Sadoun to thank him for bringing this glimmer of Christmas light! Looking forward to 2025, Publicis’ holistic offering, scale and clear positioning put it alongside the highly acquisitive Stagwell and the soon-to-be-decoupled and separately listed Havas as the most interesting groups to watch next year. Read more

The numbers were looking good for the agency network halfway through 2024, but has it managed to keep momentum moving in the right direction? Our number-cruncher, Barry Dudley of Green Square, suggests not. At the half-year point, I sensed that momentum may be picking up at Dentsu. Unfortunately, the Q3 results don’t seem to show this, with just 0.3% organic growth in net revenue and the guidance for the full year being moved down to “circa 0%” from 1%. But this does mean two quarters of (marginal) growth, following declines in the previous five quarters, so it’s at least momentum in the right direction. Japan, Dentsu’s biggest market by far, saw “solid” organic growth (2.8%) driven by double-digit growth in internet media. EMEA was up a healthy 6.9%, but this was largely down to the comparative quarter in 2023 being hit by a “one-off negative impact.” Americas, its second biggest market, was down 3.1% and “the situation in APAC remains severe,” declining 11.6%, with ‘difficult market conditions” in Australia a key factor. Hiroshi Igarashi, president and global CEO at Dentsu, said: “We have seen notable global new wins in the quarter, higher pitch win rates in Japan and the steady accumulation of net wins in the media business in international markets, which is the result of our continued effort to deliver Integrated Growth Solutions. These are examples that prove the implementation of One Dentsu is affecting positive changes within our organization. “Over the last nine months, we have made internal investments around data and technology, people and culture and business operations to accelerate our competitiveness.” Undoubtedly, some of that technology investment would have been in AI, although AI was not referenced once in the whole of the press release and only three times in the 52 page Earnings Presentation. But I did find this comment: “Creative won a significant global pitch in Q3 where we were able to demonstrate synergies with Tag, especially on creativity and efficiency.” Synergies and creativity are not traditionally the best of bedfellows, but perhaps it’s that pesky AI at work… Dentsu’s next Mid-Term Management Plan is set to be announced in February 2025 and it says that “under One Dentsu [it] will achieve growth that outperforms the global market by 2027” and “the plan will cover specific business strategies to recover competitiveness.” Sounds like one hell of a plan. Looking forward to reading that. Read more

One is in high spirits thanks to accelerating growth. The other has seen its share price tumble to a record low. As Stagwell and S4 post their Q3 results, Green Square’s Barry Dudley examines the reasons behind their starkly different performance in his regular holding co results round-up. Off the back of a 13.5% decline in net revenues in Q2 comes a like-for-like drop of 12.6% in Q3 for S4. No wonder Sir Martin Sorrell, S4’s executive chairman, had a somewhat dour demeanor during his firm’s earnings call. Global macroeconomic factors, including high interest rates, were referenced. But S4’s fundamental challenge continues to be its dependence on technology clients with one client in particular pulling down its results. The outlook has been revised down to a low double-digit reduction in full-year year like-for-like net revenue – so down at least 10% against 2023, when put in plain English. Which is going to lead to a “significant reduction in the number of Monks.” Staff, that is. The Content division, S4’s largest, saw a drop of 9.1% in net revenues for the quarter. Data & Digital Media was flat, but Technology Services was down a thumping 42.1%. And by geography: Americas were down 14.5%, APAC down 21.2%, with EMEA up slightly by 1.3%. Scott Spirit, S4’s chief growth officer, talked through its “addressable market,” which I thought would add further color to why it is finding trading so tough… in 2024 ‘digital media spend’ is forecast to be up 8.7% (7.8% in 2023) and ‘ad revenue growth at the 5 main platforms’ is forecast to be up 15% (10% in 2023). Sounds like a pretty good addressable market to me! However, ‘Digital Transformation Service’ is projected to decline by 0.25% (compared with 5.2% growth in 2023). But the most fascinating numbers were in a table that showed the number of clients S4 had in four different size bandings for the year 2024 and for the same period in 2023. In 2023, there were 12 clients with revenues of more than £10m and 12 clients with revenues of between £5m and £10m – in 2024 the respective number of clients were nine and seven. As I’m pretty sure S4 hasn’t lost (m)any major clients, so that means there has been some sizeable cuts in spending. What is possibly more troubling is the picture at the other end of the scale: clients with revenues of between £0.1m and £1m have increased from 349 in 2023 to 390 in 2024. In tricky times, it is not unusual for businesses to take on smaller clients, or smaller projects than they might normally wish to in order to fill a sales gap. Sometimes this can also be the wrong type of work. There may simply be no choice: bills have to be paid. But this can create a vicious cycle where your resources are used inefficiently across too many things and then you don’t have the capacity or the right mindset to start working on converting the next £10m+ whopper. Spirit went on to say: “On the positive side our progress in new business, particularly driven by interest in our Monks.Flow AI offering has helped drive an increase in clients at the top of the funnel which we hope to develop into larger relationships in 2025”. Fingers crossed. Then there was Stagwell, with its waxed surfboard. If S4 has the challenge of its dependency (44% of revenues) on the Technology sector, Stagwell has the upside of a strong Advocacy practice which benefited from a US election that supposedly saw a combined cost of $3.5bn around the Trump and Harris campaigns. Stagwell’s Q3 organic net revenue growth was 7.6%, or 4.6% if you exclude advocacy work. All of its ‘principal capabilities’ saw organic growth with Stagwell Marketing Cloud Group up 23.3% and Digital Transformation up 14.5% – the latter a particularly stark contrast to S4’s fortunes. If the US, organic net revenue growth of 10.8% was helped by the election. I suspect the UK’s decline of 10.1% was due in part to clients holding back spending whilst they waited to see the outcome of the recent budget. ‘Other’ was down 0.9%. Mark Penn, Stagwell’s chairman and CEO, said: “The third quarter results show us returning to industry-leading growth. We believe we are poised to deliver double-digit growth in the fourth quarter and will be well-positioned for 2025. We are reaffirming our full-year guidance today after a more moderated start to the year. We are accelerating into the back half. Our new business momentum continued as we won our single largest deal to date with a global tech company and have expanded our work with major tech companies this quarter by 30%. Our tech company relationships have come back strongly. We posted a net new business figure of $101m, bringing our LTM new business to $345m, another company record. This was driven by a new business pipeline, and increasingly larger global pitches”. One of the share prices dropped 15.86% during the trading day of the announcement, the other jumped 2.95% – I’ll leave you to guess which was which. But I know which chairman I would rather have had a cup of tea with after these announcements…